Credit Enhancement in Project Finance: Tools, Trends, and Tactics

FG Capital Advisors partners with sponsors to secure tailored credit enhancement packages—guarantees, insurance wraps and structured debt—to lower funding costs and attract institutional capital for complex infrastructure and resource projects.

Standalone Projects vs. Market Reality

Even projects with strong cashflow forecasts struggle to meet lender rating thresholds. Without an investment-grade anchor, banks demand steep spreads or simply withdraw.

Our credit enhancement solutions—partial risk guarantees, standby letters of credit and political risk insurance—shift critical risks off your balance sheet and onto top-tier ECAs and insurers. The result? Spread compression, deeper investor pools and smoother deal execution.

Credit Enhancement Blueprint

A five-step approach to structure and deploy effective enhancement:

  1. Risk Assessment — Map construction, political and payment risks against project cashflows.
  2. Counterparty Matching — Align needs with ECAs, MDBs and A-rated banks offering guarantees or wraps.
  3. Term Structuring — Negotiate fees, collateral calls, tenor and claim triggers.
  4. Documentation & Closing — Integrate enhancement agreements with loan docs and intercreditor terms.
  5. Monitoring & Execution — Track performance, covenant compliance and manage claim processes.

Credit Enhancement Services We Offer

  • ECA & MDB Guarantees: Partial or full risk coverage for political, sovereign and performance risks.
  • Standby Letters of Credit: Bank-issued credit support for payment shortfalls.
  • Political Risk Insurance: Protection against expropriation, currency inconvertibility and civil unrest.
  • Bond Insurance: Wraps to elevate unrated project bonds to investment-grade status.
  • Synthetic Credit Wraps: Derivative-based credit enhancement structures.

Why FG Capital Advisors for Credit Enhancement

  • Deep Sector Expertise: Proven track record across energy, transport and social infrastructure.
  • Global ECA Relationships: Direct access to top-tier export credit agencies and multilaterals.
  • Custom Structures: Blend of guarantees, LOCs and insurance for optimal cost and coverage.
  • Investor Access: Tap pension funds, infrastructure debt funds and rated bond markets.
  • Execution Precision: Detailed documentation and intercreditor alignment to avoid closing delays.
  • Ongoing Support: Active monitoring and claim management throughout project life.

Frequently Asked Questions: Credit Enhancement

When is credit enhancement essential?
For any project lacking an investment-grade sponsor or operating in high-risk markets—broaden your investor base and lower spreads.

What fees should I budget?
Partial guarantees typically run 50–150 bp; standby letters of credit range from 20–60 bp, varying by tenor and counterparty strength.

Which providers are best?
Key players include US Ex-Im Bank, Sinosure, Euler Hermes, MIGA, IFC and A-rated global banks with insurance arms.

Service Disclaimers & Important Considerations

This content is for general guidance. Final terms and availability depend on project specifics, legal frameworks and counterparty approval.

Credit enhancement introduces counterparty and documentation risks. Sponsors should seek independent legal, tax and financial advice before engaging.