The Lowdown On Credit Enhancement for Accelerated Infrastructure Investment

A properly structured transaction in Zimbabwe with sound credit enhancement can reduce the loan interest rate significantly Michael Tichareva Investors, bond buyers and lenders typically look for highly-rated investment grade (BBB-/Baa3) cash-generating assets to reduce the chances of losing money. A common funding model uses credit enhancement products to reduce credit risk and subsequently obtain more attractive financing terms and interest rates. For example, a properly structured transaction in Zimbabwe with sound credit enhancement can reduce the loan interest rate significantly. In such a case, the typical form of security is a guarantee from an investment grade-rated corporate or sovereign entity sponsoring the project or other third-party guarantees. International rating agencies such as Moody’s, Standard & Poor, Fitch and AM Best rate entities on the basis of how likely they are to default on their obligations. Investment grade is from BBB- to AAA ratings.