Bonds issued in a PPP Project financing context are commonly known as "project bonds". The Private Partner may be the issuer of the project bonds itself, but it is common for the bonds to be issued by a special purpose entity (the "Issuer"), separate from the Private Partner, who on lends the proceeds to the Private Partner. This may be for reasons of convenience, or for regulatory or tax reasons. Commonly, the Issuer and the Private Partner will be sister companies. Issuers, like Private Partners, must ensure they comply with their constitutional documents, applicable legislation and regulations and obtain all necessary internal and external authorisations.
The process for issuing the bonds will depend on whether they are to be publicly issued or privately placed. The timing depends on a range of issues and due diligence requirements, such as the time required for due diligence and credit review by rating agencies and investors, preparation of disclosure documents such as an offering memorandum or prospectus, the listing process (if applicable), the opening of bank accounts, planning and implementation of a roadshow marketing process and preparation of final transaction documentation.
The arranging bank and Private Partner representatives usually go on an investor roadshow at which they will present the Issuer, the PPP Project, the management of the Private Partner, the proposed financing and the risk mitigation features, and give the investors the opportunity to ask for more information. In the case of a private placement, a similar but more targeted process aimed at individual investors would take place.
Project bonds are repaid in instalments which may be equal or sculpted and/or a 'balloon' (larger) principal repayment at final maturity. Interest is typically paid regularly and is known as the bond "coupon" - this is the investors' return.