What is refinancing?

As stated above, refinancing refers to any change to a project's debt financing arrangements. Such changes might include one or more of the following:

•  increasing the term of the bank loan;

•  changing the lender (although the original financing documents may allow some changes in the lenders that will not constitute refinancing);

•  changing the 'margin' used to determine the amount of interest payable on the loan;

•  changing the hedging arrangements used to fix interest rates;

•  increasing the size of the loan (sometimes done to enable the equity providers to be repaid some of their equity or to enable early repayment of subordinated debt);

•  removing or easing constraints on dividend payments to shareholders;

•  removing or easing conditions on the loan such as the requirement to hold money in reserve accounts; or

•  replacing bank debt with bond finance, or vice versa.