Several European banks are said to be considering project finance collateralized loan obligations. A number of London-based bankers and analysts say banks are exploring project finance deals for balance sheet management and capital relief purposes. ABN Amro and Deutsche Bank are among the banks said to be considering such deals. After Basel II comes into effect, project finance loans will attract greater capital requirements, notes one structured finance expert.
However, bankers and analysts agree project finance deals are very difficult to structure and execute because of the extreme diversity of the underlying assets and the wide spectrum of risk represented. Such a deal would also require lots of credit enhancement, says one banker. To date, only one known project finance CLO has been priced.