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Amortizing Mini Perm Financing
Practical Law Glossary Item 8-500-3117 (Approx. 2 pages)
Glossary
Amortizing Mini Perm Financing
A type of mini perm financing that eliminates refinancing risk by requiring that the bond (or other form of take out financing) be incurred at the same time as the commercial loans. In this structure, the commercial loans are repaid first (typically within five to seven years).
Mini perm structures enable commercial banks that cannot offer long term tenors to participate in financings by providing loans with shorter tenors. These loans typically cover the construction phase of a project and a four or five-year period after project completion.
This type of financing is in contrast to:
- Hard mini perm financing in which the project company's failure to refinance the loans is an event of default.
- Soft mini perm financing in which the failure to refinance the loan does not result in an event of default but includes terms that incentivize, refinancing. In these structures, if the project company does not refinance the loans, it becomes subject to more onerous financing terms (for example, an increase in the margin and prohibitions on distributions to the project sponsor).
For more information on these issues, see Practice Notes, Project Finance: Overview, Project Finance: Sources of Available Financing and Financial Covenants: Project Finance Transactions, and Project Finance Waterfall Provision Flowchart.
For more information on financing sources available to repay these loans, see Practice Notes, Sources of Available Project Financing: Term Loan B Facilities and Sources of Available Project Financing: Project Bonds.