We extend the structural credit risk model of illiquid debt developed by Blanc-Brude and Hasan (2016) to incorporate the step-in option of senior creditors in project financing and model its impact on the valuation and risk profile of senior unsecured project debt.
A Structural Credit Risk Model for Illiquid Debt
We develop a structural credit risk model relying on cash flow data to derive credit risk metrics that is useful for illiquid assets for which a time series of prices is not observable. Our methodology is designed to require a parsimonious dataset of observable inputs.
Cash Flow Dynamics of Infrastructure Project Debt: Empirical evidence and dynamic modelling
The objectives of this paper are to document the statistical characteristics of debt service cover ratios (DSCRs) in infrastructure project finance, and to develop and calibrate a model of DSCR dynamics. Advanced stochastic modelling of infrastructure project debt has the potential to considerably improve credit risk measures.
Unlisted Infrastructure Debt Valuation & Performance: Theoretical Framework and Data Collection Requirements
This paper is part of an ongoing research project aiming to create long-term investment benchmarks for investors in infrastructure. It is the first valuation and risk measurement model created specifically for unlisted infrastructure debt instruments.