Most PPP (especially BOT) projects have high debt-equity ratios and which frequently conforms to the Bangko Sentral ng Pilipinas (BSP) requirement of at least 30% equity to 70% debt. This means that a sizeable percentage of the investments for a particular PPP project is sourced from credit financing. Hence, it is essential that the terms and conditions for the initiative lenders must pass the lenders' own criteria, mainly benchmarks on the ability of the project or sponsors to service the debt.
Under a BOT-type model, financing is provided only to the private sector partner. Neither the government nor the parent companies are directly liable for project debt. In this case, mobilized financing is generally on a limited recourse basis. Equity investors prefer this structure since it limits their exposure to the project. Lenders are more stringent due to limited collateral, relying mostly on projected cash flows. Because of this, the lenders will usually require step-in rights or the authority to assign new management for the project if the sponsor fails, so that the project will continue to generate revenues.