RAM Ratings publishes criteria for deferred equity in project finance

Published on 09 Mar 2021.

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RAM Ratings today released a criteria paper for the assessment of project-finance transactions with progressive or back-ended equity infusions from their sponsors. Driven by keener competition and less lucrative concession-based projects, there have been more concerted efforts to enhance shareholders’ returns from recent project-finance transactions. Delaying equity injection towards the later stage of project construction is a good example. 

Financing structures with deferred equity obligations expose a project to funding uncertainty, potentially resulting in failure to complete and heightening default risk for its lenders. That said, the use of deferred equity does not preclude a project from attaining a strong credit rating.  

Our evaluation on deferred equity contribution focuses on the sponsor’s credit strength as well as its willingness and incentive to contribute promptly. The paper also discusses the various forms of contingent financial support that could help the sponsor ensure certainty of funding for the project. In addition, it outlines the minimum required terms and general principles that RAM considers acceptable. 

For further details, please refer to Deferred Equity in Project Finance, which is available at www.ram.com.my.


Analytical contact
Chong Van Nee, CFA
(603) 3385 2482

Media contact
Padthma Subbiah
(603) 3385 2577


About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


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Publication Date Published Category
Deferred Equity in Project Finance 09-Mar-2021 Criteria & Methodology View PDF