Project Finance structures facilitate the funding of large infrastructure projects, diversify funding sources, and allocate risks to parties best equipped to manage them. It allows non-recourse financing, reducing borrower risk, and off-balance sheet financing, reducing the impact of debt on the sponsor’s balance sheet. Overall, Project Finance is a beneficial financing method for large-scale, capital-intensive projects that reduces risk to investors and borrowers. Project Finance structures would not be possible without the participation of knowledgeable experienced parties to the transaction including a strong agency services provider.
An agency service provider is a third-party service provider that acts as a neutral intermediary between the parties involved in a Project Finance deal. The provider takes on various roles, such as Collateral Agent, Account Bank, Administrative Agent, and Intercreditor Agent, to ensure that the deal runs smoothly. The importance of having an agency services provider acting in these roles cannot be overstated. While required on many deals, having a strong agency services provider can make a material difference in the success of a project.
Roles of agency service providers
Agency service providers help manage the complex contractual relationships between the various parties involved in the Project Finance deal. The provider acts as an intermediary between the lenders, borrowers, and other stakeholders, ensuring adherence to covenants, terms, and conditions agreed to by the various parties to a transaction. They also make sure all parties are kept up to date and that any issues that arise are resolved in a timely manner.
An agency service provider can act as:
Collateral agent—manage the collateral and the security interest for Project Financing. The provider can hold and manage the security or collateral on behalf of the lenders, ensuring that it is properly secured and that the lenders have the necessary protections in place.
Account Bank or Depositary—provide banking services to the project company. The provider can manage the project company’s Waterfall accounts, ensuring that all payments are made in a timely manner and that the project company’s reserve accounts are properly funded.
Administrative Agent—manage the day-to-day operations of the Project Finance loan. The provider coordinates between the various parties involved, ensuring that the loan runs smoothly and that all parties are working together effectively.
Intercreditor Agent—manage the relationships between the various lenders and their collateral, involved in the project finance deal. The provider ensures that the lenders are working together effectively and that any issues that arise are resolved in a timely manner.
An agent can also provide services as Paying Agent, Calculation Agent, and other related roles. What distinguishes the best service providers is their ability to customize services and create bespoke solutions that meet the unique challenges associated with a particular project finance matter.
In conclusion, Project Finance is a complex financing method that requires effective management of the financial and contractual relationships between the various parties involved. An agency service provider can play a crucial role in ensuring that the project finance deal runs smoothly. By acting as a collateral agent, account bank, administrative agent, and intercreditor agent, the provider can help to manage the complex contractual relationships between the various parties involved, ensuring that the deal is a success.
We’re Here to Help
Delaware Trust, a wholly owned subsidiary of CSC, is a leading provider of Corporate Trust and Agency services. Our world class service–Net Promoter Scores–are proof that we consistently deliver exceptional results on time. We assign each deal a single point of contact; and our innovative technology solutions streamline our KYC processing for faster onboarding. Finally, Delaware Trust is an independent trust company, not affiliated with any lending institution, minimizing the likelihood of conflict of interest.
We support Corporate Finance professionals across a broad suite of services, including Independent Director, Collateral Agent, Indenture Trustee, Section 363 Escrow Agent, liquidating and litigation Trustee, and more. To learn more, visit us at delawaretrust.com.
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