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Legal Alerts

10/08/2020

Project Bonds: Details Revealed

Legal Alerts
Capital Markets
Financial Institutions

Recent Developments

Project based securities (“PBS”), first introduced in the amendments to the Capital Markets Law No. 6362 on February 25, 2020, are now being regulated by the Draft Communiqué on Project Based Securities (“Draft Communiqué”). You may access the Draft Communiqué here.

What’s New?

  • The Draft Communiqué paves the way for debt securities based on financing public services projects such as transportation, infrastructure, energy, industry, technology, communication or health to be pooled in a special fund and to be traded in capital markets.
  • Accordingly, project financing fund (“Fund”) will be established on fiduciary ownership basis without having a legal entity and will be responsible for the management of the portfolio, consisting of money and/or other assets raised for the project-based securities. The establishment of the Fund will be subject to the approval of the Capital Markets Board.
  • PBS will be issued based on (i) project income and other rights arising from the financing of a project; or (ii) receivables arising from secured loans provided for financing different projects and refinancing of those loans.
  • PBS may be issued domestically via public offering, to qualified investors without public offering or via private placement. PBS can also be offered in international markets. The proceeds of the issuance will be used for financing the relevant project, and the investors investing in the Fund will make a long-term profit from the fund’s income.

Conclusion 
By launching the long-awaited PBS, the Draft Communiqué offers investors a new investment opportunity and provides contractors a new tool to finance projects related to public services.

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