Practical Law Glossary Item w-035-1242 (Approx. 3 pages)
Glossary
Bankability
In project financing, the acceptability of a project's structure to the project's potential lenders (including commercial banks and institutional investors) so that they are willing to extend financing to the project developer on a limited resource basis to:
Build, modify, or rehabilitate the project.
Refinance the project's existing debt.
Other parties involved in the transaction (for example, the contractor and equity investors) may also conduct a bankability analysis, but the lenders' analysis and determination control.
A determination of bankability involves:
Analysis of the parties involved in the transaction, their rights and obligations, and their potential impact on the project and the lenders' rights.
Identification, allocation, and mitigation of the project's risks, including:
governing the project's construction, operation, and maintenance;
under which the project company obtains the inputs and components it needs to construct, operate, and maintain the project; and
setting out how the project company will generate the revenues necessary to repay the project company's debt and meet its other obligations.
Analysis of the lenders' rights under the transaction documents, including their ability to enforce their rights under these documents and to foreclose on the project assets and other collateral securing the project company's obligations under the transaction documents.
For more information on bankability of a project, see Practice Notes: