프로젝트 파이낸스와 구조화금융 - 프로젝트 파이낸스(PF)의 본질과 그 구조화 -

Abstract

In the Project Finance (“PF”), it is ordinary that the sponsors establish legally distinct economic entities(project company: “PC”), in order to develop, manage, and finance the project. A PC borrows money on ‘a limited or non-recourse’ basis from the banks on the condition that they rely on the cash flow of the project rather than on the assets or general credit of the sponsors for the loan repayment. However, the domestic PF in a field of real estate development highly relies on the credit and capacity of construction companies, placing all the risks arising out of the project on the sponsors. From an international perspective, the enactment of a special Act (such as ‘Project Finance Company Act’) is recommendable and necessary in order to increase basic standards and requirements for the domestic PF to match the international standards. On the other hand, a loan from a bank and a receivable from a construction company arising out of PF, can be ‘structured’ to raise funds from its assets. In a securitization process, a form of Structured Finance(“SF”), a company deconstructs itself by separating certain types of liquid assets, and use these assets to raise funds in the capital markets. One of the main objectives of the Asset-Backed Securitization Act(“ABS” Act)was to introduce ABS to the domestic economy swiftly. Nonetheless, it could be argued that the Act has not fully corresponded to our legal system, due to its origin (U.S.). There are several legal issues surrounding ABS and, the most important one must be the legal aspect with regard to the ‘true sale’ of the assets (receivables). The ‘true sale’ has been designed to prevent the assets (obligations) transferred to the special purpose vehicle (hereinafter “SPV”), from the bankruptcy of the transferor, which is considered a sale of the obligation, despite the fact that the transferor, after the transfer, went into the bankruptcy. As for 'sale asset-backed securitization transactions' in the ABS, as stated in article 13 of the Act, there should be some conditions and requirements to be satisfied. However, its requisites are so obscure that a related party would be confused hence had limited its transaction. In this regard, the amendment of the ABS Act is strongly recommended in order to strengthen the progressive ABS markets in Korea. A derivatives transaction, an another form of SF, is a bilateral contract or payments exchange agreement, value of which is derived from the value of an underlying asset, underlying reference rate or index. With the enactment of Capital Market and Financial Investment Business Act(“CMFIB” Act), the foundation of derivatives transactions in Korea has been established. Specifically, the article 3 (2)of CMFIB classifies the ‘financial investment instruments’ under paragraph (1) into “Securities” and “Derivatives”. Generally speaking, the credit derivatives enable an investor to receive a return, which is calculated by reference to the credit performance of a specified entity (“the reference entity”). Needless to say, the most common Credit Derivatives Transactions are Credit Default Swaps (“CDS”),Credit-Linked Notes (“CLN”), Collateralized Debt Obligations(“CDO”), and synthetic CDO. It should be noted that as derivatives markets have rapidly grown since the last decade, some relevant legal and economical issues have emerged accordingly. Many people believe that derivative instruments are complex, opaque,difficult to manage, and more risky than other traditional financial products. As a result, the sub-prime crisis in the U.S. had turned the world economy into turmoil. Therefore, the U.S. as well as EU had to enact various statutes to supervise and control the derivative transactions in order to protect the consumers. Following such a move, Korea also has stepped in regulating the derivative transactions from a customer’s perspective. In conclusion, it is recommendable that a resilient legal scheme and a safe harbor should be prepared to resolve the doubts of market participants and to manage the risks that might arise in the market. Nevertheless,the growth of derivatives transactions should not be undermined as such a measure must be capable of guaranteeing safe derivative transactions. In this regard, the complimentary procedures and the supervisory initiatives of regulatory authorities must follow.