Is Project Finance IB or Commercial Banking ??? activities, commercial, department, investment, structured

Maddin

Hey all,

I am wondering about your views on the matter.
In my mind it's not IB but commercial banking.

However, some investment banks' project finance department is a part of their IBD or structured finance department.

Wikipedia seems to group project finance under "core investment banking activities".

Some stuff inherent to project finance which tend to be associated with IB or structured finance:

- High leverage: Equity in projects tends to range (depending on types of projects) from 20% to as low as 10%. Net Debt / EBITDA in early years tends to be in the 7x to 9x range.

- Extensive cash flow modelling, as debt service is secured by project's cash flows and not sponsor's credit.

- Complex transaction and capital structure, often with many debt tranches that refinance one another at some point.

- ...


Does it qualify in your view as IB ?

Anyone here involved with that type of stuff ?

willsucceed

I disagree with your logic.

I think it's not about size but about structure.

Structuring the mini buy out of a 50M company with let's say:
- 10M Senior Revolver
- 10M Senior Term Loan
- 10M High Yield
- 5M Mezzanine
- 15M Equity

is IB to me. Mini-IB but still IB.

On the other hand, a big commercial bank providing a 300M plain vanilla senior loan to a corporation isn't doing IB.

sameeragarwal

My friend who works in infrastructure banking does deals 100mm to 4b. I am sorry but nothing that level is commercial banking anymore.