Funding risk

Funding risk

The risk associated with the impact on a project's cash flow from higher funding costs or lack of availability of funds. See: interest rate risk.

Interest Rate Risk

The risk of loss due to a change in interest rates. Interest rate risk is important to transactions like interest rate swaps. In such a transaction, the party receiving the floating rate will receive a smaller amount should the floating rate decrease. Interest rate risk is also important to bonds; if interest rates rise, the prices of bonds fall. This affects the secondary market for bonds; for example, if one purchases a bond with a 3% interest rate and the prevailing rate rises to 5%, it becomes difficult or impossible to resell the bond at a profit. Finally, interest rate risk is important to project finance. If interest rates rise, funding may not be available for a new loan for a project that has already started.
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The advantage of the pre-funding scenario is that it transfers future funding risk to the capital markets at the inception of the transaction but has the disadvantage of reinvestment risk (negative carry) until the funds are fully deployed in the reinsurance trust.
The rating, however, derives comfort from the low land cost of the project, modest funding risk and the promoter's experience of successfully completing a similar project (Technopolis-I) in the past.
The new contract removes all credit and funding risk to Polaris immediately and also eliminates the need for Polaris to maintain a retail credit cash deposit with HSBC, which was $49.
This funding risk is further mitigated by the quality of the receivables portfolio in that the majority of the receivables are from BBB+ or better rated credits.
Assuming all financial commitments complete as expected, the funding risk to the company is effectively reduced into 2003 and possibly beyond.
The commercial loans and core deposits acquired from FBF have led to improved portfolio diversification and reduced funding risk.
Potts continued, "We have reduced our funding risk and improved our liquidity since the beginning of the quarter.
Also, a more conventional debt-to-equity leverage ratio analysis was used for assessing funding risk.
Additionally, a more conventional debt to equity leverage ratio analysis was used for assessing funding risk.
This requires the REIT to access the capital markets more frequently than it would if it were able to retain its earnings, which adds funding risk to the REIT's profile.
The rating downgrade was prompted by the material increase in long-term funding risks for eurozone sovereigns with high levels of public debt such as Italy and growing downside risks to Italy's economic growth due to a weakening global outlook, the rating agency said.
The ratings agency blamed a "material increase in long-term funding risks for the euro area", due to lost confidence in eurozone government debts.

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