Bridging Finance
Monday March 31st 2008
Bridging finance has this week played a major role in helping international companies to take forward important projects.Often serving as interim finance on residential property mortgages, bridging loans are also a key part of securing commercial financing for major projects – especially as the credit crunch makes funding harder to come by.
British bank HSBC has provided key bridging finance to West Coast Power, a Sri Lankan energy company, in order to allow the firm to advance plans for a 33 MW power plant to serve the country's electricity needs.
Due to the urgency of answering the country's power shortage, bridging finance will provide crucial short-term funding, allowing the project to get under way while the bank acts as sole mandated lead arranger to raise a larger longer-term loan for West Coast Power.
And elsewhere bridging finance looks set to play a major part in what could be one of the biggest takeover projects of the year.
Metal mining giant BHP Billiton has negotiated some $55 billion (£27 billion) of bridging finance in order to facilitate its bid for rival Rio Tinto, designating the funding to potentially refinancing Rio's debts and to a possible share buyback.