Trust and agency services are vital to managing the complex financial and operational aspects of project finance, ensuring that projects remain on track, risks are minimized, and all stakeholders’ interests are protected.
When it comes to project finance, managing risk is a key priority. Whether that’s identifying, assessing, or allocating risks among stakeholders, addressing KYC and compliance early in a deal, or preventing costly delays, trust and agency service providers are crucial to keeping a project on track. Most project finance structures would not be possible without the participation of a knowledgeable, experienced trust and agency service provider to act as a neutral intermediary between the parties involved. The provider takes on various roles, such as collateral agent, account bank, administrative agent, and intercreditor agent to ensure that the deal runs smoothly, clear communication between different parties is managed, and payments are made according to governing documents.
Trust and agency service providers must demonstrate experience
In early 2024, CSC commissioned research among 200 global industry professionals working in project finance to understand what they look for in a trust and agency service provider. The number one valued attribute was proven experience across similar transactions and asset classes.
Organizations need to know that they can tap into experience and expertise on projects such as syndicated loans, private placements, and capital markets execution from the outset.
This expertise ensures that critical skills such as deal documentation, managing KYC, and hitting financing deadlines are second nature to the provider. Understanding the make-up of a transaction is also important, including knowing which organizations are playing which roles, and coordinating actions between counterparties—which could include borrowers, agents, swap counterparties, and hedge providers.
Navigating market volatility
Crucially, in recent times, proven experience covers much more than just operational processes. It’s also about anticipating and safeguarding against market volatility.
Volatility goes beyond major events like the recent pandemic, political unrest, inflation, and rising interest rates. It also includes regulatory changes and the broadening of debt instruments, such as private placement notes and sustainable lending.
Service providers need to understand that deals are being structured in more sophisticated ways to prepare for the unknown. For instance, some deals are now put together to include different instruments like delayed draw components that cover additional funding, which may need to be accessed due to market volatility.
And it’s not just about reacting to problems when they occur. Different teams within the service provider, including operations, legal and finance, also need to work closely together so that potential problems are identified and addressed before they come to light to the broader group.
Technology factors and real-time reporting in project finance
Technology plays a massive role in monitoring events and staying ahead of deadlines. For example, tools that raise alerts for upcoming payment milestones, compliance items due, or other key events help avoid costly mistakes like missed payments and failure to deliver certain items set forth in the agreement that could trigger defaults
Our survey respondents echoed this, stating that the second and third most important factors to consider when selecting a services provider were:
- Their ability to provide a full suite of administrative processes and bespoke solutions before, during and after a deal
- The use of innovative technology with real-time access to account activities
As deals become more complex, technology must be upgraded to support sophisticated new instruments, greater cyber-security requirements, and enhanced data analytics that provide improved financial modelling.
This means that trust and agency service providers need to manage all the moving parts of every deal, within the parameters of their designated roles and responsibilities. Ideally, they can offer a solutions-driven approach to any project finance initiative, regardless of its shape, size and location.
How CSC’s expertise ensures project finance success
An independent third party like CSC essentially acts as a risk mitigant and provides an experienced, bespoke, and independent service and technologies solution fully focused on getting deals done for clients.
CSC is not a lender to transactions and will stay with a deal from the onset through maturity as well as any refinancing of the project that may take place. As a partner, CSC’s success is defined by its clients’ success rather than simply performing duties prescribed in an agreement. We fulfill a multitude of required roles and responsibilities across the globe, providing a more coordinated and simplified approach than managing multiple agents.
Our 125-year history, private ownership structure, and independence as a non-lending institution means that we are here for the long-term, and customers can trust that we will be around for the length of any transaction.
