Financing Without Recourse
LexInter | December 20, 2008 | 0 Comments

Financing Without Recourse

Non-recourse financing

Non-recourse financing is financing that is made on the sole basis of a project or an asset. The repayment of the contracted debt is ensured by the only income generated by the project or the asset (for a good such as an airplane, a ship or a satellite).

The non-recourse financing is the basis of project finance and asset finance . Non-recourse financing is also a technique that falls within the framework of leveraged transactions .

In non-recourse financing, the lender of funds waives any recourse against the promoter of the operation, whether it is the project or the asset financed. The promoter of the operation is not responsible on its assets for the debts contracted in the event of failure of the project or insufficient profitability of the asset.

The project or the asset are generally isolated in an ad hoc company created specifically for the realization of the project or the acquisition of the asset.

The non-recourse financing technique prevents debts contracted for the realization of the project or the acquisition of the asset from appearing on the balance sheet of the promoter of the operation. It is part of deconsolidation techniques from an accounting standpoint.

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