Credit Analysis in Project Finance

Based on the most helpful WSO content, here are some additional metrics and analyses used in credit analysis for project finance beyond DSCR (Debt Service Coverage Ratio), LLCR (Loan Life Coverage Ratio), and PLCR (Project Life Coverage Ratio):

1. Global DSCR: This involves calculating the DSCR for the entire portfolio, not just individual projects. It provides a holistic view of the borrower's ability to service debt across all projects.

2. Debt Yield: This is the net operating income (NOI) divided by the total loan amount. It helps in assessing the return a lender would get if they had to foreclose on the property.

3. Debt/Total Capital: This ratio measures the proportion of debt in the total capital structure. If this exceeds 60%, it typically triggers a deeper analysis of which properties are highly levered and their performance.

4. Guarantor Analysis: This is often the most time-consuming part of loan memos. It involves evaluating the financial strength and creditworthiness of the guarantors backing the project.

5. WALT (Weighted Average Lease Term): This metric is used to assess the average remaining lease term of the tenants in a property, which can impact the stability of cash flows.

6. Tenant Credit: Evaluating the creditworthiness of the tenants can provide insights into the reliability of rental income.

These metrics and analyses provide a comprehensive view of the financial health and risk associated with a project, beyond the standard DSCR, LLCR, and PLCR.

For more detailed discussions and examples, you might want to explore the WSO forums and resources related to credit analysis in project finance.

Sources: Interactive Debt Sizing Matrices, Question For the Credit Guys: When Is A Borrower Over levered?, Lender/Debt Fund Modeling vs Broker Modeling, Creative financing, Is Greenland USA and the Metropolis Project in Trouble?