Category 1

Category 2

Category 3

Category 4

Factor: financial strength

Demand is strong and growing, strong entry barriers, low sensitivity to changes in technology and economic outlook.

Demand is strong and stable. Some entry barriers, some sensitivity to changes in technology and economic outlook.

Demand is adequate and stable, limited entry barriers, significant sensitivity to changes in technology and economic outlook.

Demand is weak and declining, vulnerable to changes in technology and economic outlook, highly uncertain environment.

Strong financial ratios considering the type of asset. Very robust economic assumptions.

Strong/acceptable financial ratios considering the type of asset. Robust project economic assumptions.

Standard financial ratios for the asset type

Aggressive financial ratios considering the type of asset

Strong LTV ratio considering the type of asset

Strong/good LTV ratio considering the type of asset

Standard LTV ratio for the asset type

Aggressive LTV ratio considering the type of asset

Stable long-term revenues, capable of withstanding severely stressed conditions through an economic cycle

Satisfactory short-term revenues. Loan can withstand some financial adversity. Default is only likely under severe economic conditions

Uncertain short-term revenues. Cash flows are vulnerable to stresses that are not uncommon through an economic cycle. The loan may default in an economic downturn

Revenues subject to strong uncertainties; even in normal economic conditions the asset may default, unless conditions improve

Market is structured on a worldwide basis; assets are highly liquid.

Market is worldwide or regional; assets are relatively liquid.

Market is regional with limited prospects in the short term, implying lower liquidity.

Local market and/or poor visibility. Low or no liquidity, particularly on niche markets.

Factor: political and legal environment

Jurisdiction is favourable to repossession and enforcement of contracts.

Jurisdiction is favourable to repossession and enforcement of contracts.

Jurisdiction is generally favourable to repossession and enforcement of contracts, even if repossession might be long and/or difficult.

Poor or unstable legal and regulatory environment. Jurisdiction may make repossession and enforcement of contracts lengthy or impossible.

Very low exposure; strong mitigation instruments, if needed

Low exposure; satisfactory mitigation instruments, if needed

Moderate exposure; fair mitigation instruments

High exposure; no or weak mitigation instruments

Factor: transaction characteristics

Amortising debt without bullet repayment

Amortising debt with no or insignificant bullet repayment

Amortising debt repayments with limited bullet payment

Bullet repayment or amortising debt repayments with high bullet repayment

There is no or very limited exposure to market or cycle risk since the expected cashflows cover all future loan repayments during the tenor of the loan (5) and there are no significant delays between the cashflows and the loan repayments.

There is no or very low refinancing risk.

The exposure to market or cycle risk is limited since the expected cashflows cover the majority of future loan repayments during the tenor of the loan and there are no significant delays between the cashflows and the loan repayments.

There is low refinancing risk.

There is moderate exposure to market or cycle risk since the expected cashflows cover only a part of future loan repayments during the tenor of the loan or there are some significant delays between the cashflows and the loan repayments.

Average refinancing risk.

There is significant exposure to market or cycle risk since the expected cashflows cover only a small part of future loan repayments during the tenor of the loan or there are some significant delays between the cashflows and the loan repayments.

High refinancing risk.

All permits have been obtained; asset meets current and foreseeable safety regulations.

All permits obtained or in the process of being obtained; asset meets current and foreseeable safety regulations.

Most permits obtained or in process of being obtained, outstanding ones considered routine, asset meets current safety regulations.

Problems in obtaining all required permits, part of the planned configuration and/or planned operations might need to be revised.

Strong long-term O&M contract (6), preferably with contractual performance incentives, and/or O&M reserve accounts (if needed)

Long-term O&M contract, and/or O&M reserve accounts (7) (if needed)

Limited O&M contract or O&M reserve account (if needed)

No O&M contract: risk of high operational cost overruns beyond mitigants

Excellent track record and strong re-marketing capability

Satisfactory track record and re-marketing capability

Weak or short track record and uncertain re-marketing capability

No or unknown track record and inability to re-market the asset

Factor: asset characteristics

Strong advantage in design and maintenance. Configuration is standard such that the object meets a liquid market.

Above average design and maintenance. Standard configuration, maybe with very limited exceptions – such that the object meets a liquid market

Average design and maintenance. Configuration is somewhat specific, and thus might cause a narrower market for the object.

Below average design and maintenance. Asset is near the end of its economic life. Configuration is very specific; the market for the object is very narrow.

Current resale value is well above debt value.

Resale value is moderately above debt value.

Resale value is slightly above debt value.

Resale value is below debt value.

Asset value and liquidity are relatively insensitive to economic cycles.

Asset value and liquidity are sensitive to economic cycles.

Asset value and liquidity are quite sensitive to economic cycles.

Asset value and liquidity are highly sensitive to economic cycles.

Factor: strength of sponsor (including public private partnership)

Sponsors with excellent track record and high financial standing

Sponsors with good track record and good financial standing

Sponsors with adequate track record and good financial standing

Sponsors with no or questionable track record and/or financial weaknesses

Factor: security package

Legal documentation provides the lender effective control (e.g. a first perfected security interest (8), or a leasing structure including such security) on the asset, or on the company owning it.

Legal documentation provides the lender effective control (e.g. a perfected security interest, or a leasing structure including such security) on the asset, or on the company owning it.

Legal documentation provides the lender effective control (e.g. a perfected security interest, or a leasing structure including such security) on the asset, or on the company owning it.

The contract provides little security to the lender and leaves room to some risk of losing control on the asset.

The lender is able to monitor the location and condition of the asset, at any time and place (regular reports, possibility to lead inspections).

The lender is able to monitor the location and condition of the asset, almost at any time and place.

The lender is able to monitor the location and condition of the asset, almost at any time and place.

The lender’s ability to monitor the location and condition of the asset are limited.

Strong insurance coverage including collateral damages with top quality insurance companies

Satisfactory insurance coverage (not including collateral damages) with good quality insurance companies

Fair insurance coverage (not including collateral damages) with acceptable quality insurance

Weak insurance coverage (not including collateral damages) or with weak quality insurance