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Oleg Ignatyev was a speaker at the Moscow Exchange roundtable meeting

On November 13, 2018, Moscow Exchange hosted a roundtable discussion on the development of the structured bond market in Russia. Oleg Ignatiev was the speaker and spoke about the application of structured products for project finance using a concession project as an example.

In the introductory part, Oleg spoke about the structure of a concession project, risk allocation at each stage of the project and the structure of financing depending on the increase in risk and return (equity, mezzanine and debt (senior) capital).

In the main part, Oleg spoke about the advantages of using structured products in concession projects - first of all, to transfer project risks to investors in structured bonds. As potential products of this kind Oleg showed mezzanine and repackaging of claims on the concessionaire.

A mezzanine is a junior tranche of a small amount, subordinated to the senior (principal) debt. The most foreseeable risks (inflation, rate changes, etc.) can act as the underlying asset for a structured product. The main investors in such products are non-institutional investors and development institutions.

As the second potential product, Oleg spoke about repackaging of claims to the endorser: structured bonds secured by pledge of claims to the endorser. This is a senior tranche in relation to mezzanine debt, but can be subordinated to the underlying debt. The underlying asset is the risk that the concessionaire will default on its monetary obligations under the concession agreement. The main investors are institutional investors and development institutions. A high rating of the issue can be obtained by retransferring the rating of the concessionaire, since the legislation establishes the obligation of the concessionaire to reimburse all investment expenses of the concessionaire in case of early termination of the project.