The RBS Project Financial Group

Overview

The RBS Project Finance Group prides itself in providing our clients professional services of exceptional quality and of unique standing in the Emerging Market Project Finance field. The complexity surrounding the capital markets and Emerging Market Project Finance can solely be managed by firms with a comprehensive understanding of the needs of all of the relevant parties to a transaction. To ensure that a level of satisfaction is obtained between the institutional investors, lenders, private equity funds, and Project Sponsors we work with, RBS monitors the performance of our projects in order to ensure that prosperous long-term business relationships are fostered.
Our objective, amongst other things, is to provide prudent financial advice on a timely manner and satisfy the specific needs of each of our clients. RBS maintains an ample network of senior-level corporate relationships at an international level and acts at the highest level of professionalism with a work ethic inline with the interests of our clients, by never taking on the fundraising of a project in which the firm would not agree to be invested in. Project Finance transactions are off-balance sheet investments that typically take the form of a Special Purpose Vehicle (SPV) and are in excess of $100M.

Institutional Investors

RBS understands that institutional investors and private equity funds operate on stringent guidelines which limit their time horizons and risk exposure levels, particularly when investing in Emerging Market opportunities that bring appeal with their high-yielding metrics. In order to contain risk and limit the exposure of any given investor into a project RBS offers Investor Representation and Intelligence Services.

RBS Investor Representation:

RBS can represent and advise investors in various areas for the creation of corporate and project value, while streamlining the investment process with RBS attending to matters of:
• Proxy voting;
• Risk mitigation strategies;
• Strategic partner identification;
• Accountant advice;
• PR and broker consultants advice;
• Tax consequences, and;
• Legal representation (through an assign).

Intelligence Services:

Through our Intelligence@RBS services we provide qualitative and quantitative asset management reports for parties which invest in our projects through the implementation of a JD EDWARDS project management and reporting system. These JD EDWARDS reports can also be accompanied by status updates that highlight project progress and performance. Investors can also request ad-hoc queries or tailored reports surrounding a particular industry and geographic location they might be interested in (i.e. Polish Steel). These ad-hoc reports include information from the world's finest informational databases such as Thompson DataStar, Goliath, Hoover's, LexisNexis, Economist Intelligence Unit, our in-country foreign representatives, and other avenues.

Corporate Advisory

RBS works with top tier Emerging Market firms that hold strong value characteristics, including sound financial health, responsible management, transparent corporate governance, and have attractive business propositions. These firms are usually below the radar of the major international investment bodies, yet are significantly well established enough for RBS to identify them, or them to identify RBS. RBS can provide financial advice to our Project Sponsors and assist them with the development of complete a Project Plan. The Project Plan includes extensive due diligence concerning operational reviews, financial reviews, legal reviews, market research, customer references, technological assessments, auditing, translation, socio-environmental analysis and management competency analysis. Project Sponsors can also obtain our council regarding corporate actions surrounding deal valuation, transaction structure, consideration types (i.e. cash or stock), tactics, timing, strategic investors and the development of partnerships with international market leaders in a particular industry

Project Finance Consideration

The following considerations are common in most of our Project Finance transactions:

Project Repayment Cycle:

In order to ensure repayment of loans and investments the following steps are taken in order to redirect revenues typically from an offshore SPV account:
Step 1 - Pay off operating costs Step 2 - Pay off taxes Step 3 - Pay off loan interest Step 4 - Pay off loan principal Step 5 - Pay off maintenance costs Step 6 - Pay off dividends to shareholders

Financial covenants in Syndicated Credit Facility:
Covenants ensure that the Borrower agrees to refrain from certain actions in order to protect the Lender or investors interests. There are many types of covenants amongst which the most common cover matters such as working capital, debt-to-equity ratios and dividend payments. Financial covenants of most RBS Project Finance transactions will include:

I. An agreement for the Borrower to not undertake further new debt upon loan approval
II. There should be no change in ownership during project loan repayment term
III. Debt Service Coverage Ratio (DSCR) typically of at least 1.5 (varies by sector)

Security Package

The security package is used to entice an Investor and Lender's appetite for a given investment by attempting to mitigate risk through preemptive planning. Security packages are easiest to use in the process of asset-backed securitization, where the assets are used as collateral in the risk mitigation process. The securitization of trade receivables is also a common form of structured trade finance, where the quality of the receivables is measured by the credit rating quality of the Buyers. A typical Security Package will include the following:

• The pledge of Special Purpose Vehicle or Entity (SPV or SPE) shares throughout loan repayment
• A partial mortgage of land, equipment and/or Inventory
• Supply and off-take agreements assigned to Lender in case of default
• Assignment of insurance proceeds to Lender

Project Acceptance Criteria

Corporate Characteristics:

1. Minimum 5-year in-sector in-country existence and experience
2. Minimum annual sales of USD $ 20 Million
3. Minimum annual average profit of USD $1.5 Million for past 3 years
4. Corporate governance transparency and accountability
5. Company is willing to be audited by an internationally recognized entity

Project Characteristics:

7. Project is within one of the Industries of Operation
6. Project is located in one of the Emerging Markets of Operation
8. Project does not fit within the Non-Eligible Projects

Financial Characteristics

9. Preference is given to hard currency Projects (USD, EURO, POUND)
10. Maximum repayment term of 10 years for investment (debt or equity)
11. Minimum investment required of USD $15 million (debt or equity)
12. Minimum IRR of 25% per annum