A special edition of the Vietnam Investment Review (VIR) has featured comments from Acuity Funding CEO, Ranjit Thambyrajah, about the repercussions of recent bank collapses for major projects that have been financed using bonds.
By Jacquelene Pearson
According to Acuity Funding CEO, Ranjit Thambyrajah, in some countries, right now, developers who have lost their financial backing, because of recent bank collapses, are being punished for failing to fulfil their contract obligations.
Fortunately, Acuity is a flexible funding arranger with the capacity to organise funds across borders and protect its clients from the contagion of bank failures.
You can read the English version of the VIR article here… Alternatives needed if bank crisis threatens to spread (vir.com.vn)
“The greatest pain from the unravelling of the international banking system will be felt in smaller economies, where bond markets are less mature,” Mr Thambyrajah said.
“Repercussions will be felt by those who have used bonds to raise funds for major projects. If those bonds have been backed by any of the crisis-hit banks, such as Credit Suisse, their value has been destroyed.
“In countries where financial regulations are still developing, it is very difficult for the authorities to take action against the bondholders or banks backing the bonds. They can only act against the developers and project managers.”
The key to successful investing, borrowing, lending, and project management is liquidity or cash flow, according to Mr Thambyrajah.
It is essential to have access to enough cash or highly disposable assets to keep the wheels of any project turning, he told the Vietnam Investment Review.
“Without cash, you cannot pay for your supplies, your labour, for anything,” Mr Thambyrajah said in the VIR article.
“A long-held expectation of investors and borrowers is that banks that make funds available via loans or bonds will be able to honour those products with cash when needed by their borrowers or investors,” he said.
“A bank may have a big name and branches all over the world, but its bonds can become worthless overnight. Credit Suisse bonds were not insured or guaranteed, and that is a massive lesson to learn when you are relatively new to using bonds.
“Fortunately, there is a new wave of innovators or disruptors, including Acuity Funding, who combine the best of investing and lending to arrange funding for even the world’s biggest projects.
“A conventional lender, such as a bank, can lend money for a project in return for security, such as a lien over a piece of real estate or property. The limitation of this type of funding is that the lender only has a set amount of money available to lend.
“Investors can make funds available for a particular project, but they usually have quotas or caps on the amount that they can invest in any individual project or any particular type of project,” Mr Thambyrajah said.
When your project is dependent on either a lender or an investor who suddenly experiences a capital or liquidity crisis, your source of funding can dry up, completely and unexpectedly.
“If your project is to deliver a major infrastructure project for a national government with stringent timeframes and deadlines, you are in the firing line, not your investors or your lender,” Mr Thambyrajah told the VIR.
Contact Acuity Funding today if you need assistance to arrange funding for a major project.