IPDC :: Project Finance ::

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Project Finance Overview

IPDC's participation in projects financing is based primarily on the economic, technical, marketing and financial soundness inherent in the project. Projects must be commercially viable and within the demonstrated competence of the proposed management. Projects could be ventures wholly owned by Bangladeshi investors and joint ventures between local citizens and foreign firms.

Project Specification

Investors must be willing to establish sound debt-to-equity (60:40) relationships that would not jeopardize the project through insufficient equity or excessive leverage. Potential Investment must be ready to present a feasibility study which is a proviso for IPDC assistance. Projects must not have any adverse impact on the economy, its employment situation or be environmentally hazardous. IPDC will analyze and design the optimal financing plan for the project and co-ordinate it with other lenders. The plan should provide funds to meet all costs including feasibility studies, organizational expenses, land, construction, machinery, equipment, training, market development, interest payment during construction, start up expenses including any initial losses and adequate working capital. Financing for projects is provided through leases, direct loans, equity participation or a suitable combination of both services. Leasing provided for 3-5 years, Working Capital finance for 1-2 years. Financial support is unlimited but management must be convinced with the project financing worth. In case of the expansion of successful businesses or the initiation of new ventures, IPDC participation within the range specified above does not exceed 33% of the total cost or 25% of the total net worth. This limit might be relaxed if the project merit demands special consideration. IPDC normally holds a minority position in terms of the overall equity investment, but may take controlling positions and be represented in the Boards of these enterprises. Financial participation is expected be on a seniority basis, sharing in the first lien on fixed assets together with any appropriate collateral.

Interest Rate

IPDC funding offers both fixed and floating interest rate which should reflect market conditions, financial and political risks and other relevant factors. Interest payments are usually not deferred during construction and implementation periods and actual interest cost may differ slightly if loan draw downs get delayed. The interest rate configuration is thus carefully tailored to client needs, and ensures attractive and competitive terms.

Principal Repayment

Principal repayment is scheduled in accordance with the expected cash flow generated by the project following a suitable grace period. The final maturity of such loans can be up to eight years for long-term loans including suitable grace periods.

Financial participation is expected be on a seniority basis, sharing in the first lien on fixed assets together with any appropriate collateral.

Guarantee

Personal guarantees of the promoting directors are secured if deemed necessary.


Sponsors

Profile of the sponsors are considered for making the investment.

Lending Practices

Consisting with commercial lending practices, commitment, supervision, loan syndication and project appraisal fees are charged, including fees for the services and experts or consultants.

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