Interest Rate Pricing And Debt Size Decesion-making For Refinancing Of Public-private Partnership Projects

The application of PPP(Public-Private Partnership)in China has entered into a boom period since the end of 2013.Refinancing will be confronted by stakeholders of PPP projects,such as the public,the private and the lender,with more and more PPP projects begin their operation period.The core purpose of refinancing is to increase revenue and reduce risk of projects.Therefore,it is necessary to analyze the key factors that influences refinancing's revenue,which is beneficial for stakeholders to make dec ision.Firstly,the thesis concludes concepts,causes and features of PPP projects' refinancing by case study and expert interview based on review of related literature on refinancing and capital structure.Also,the mechanism for generating the revenue is inferred by theoretical analysis,and three key factors,which are debt size,capital cost and replacement ratio of debt,are analyzed.Then,the key factors that influence the pricing of interest rate of infrastructure ABS products are concluded based on review of related literature on fixed-income security pricing.And the thesis takes infrastructure ABS products that issued from 2014 to 2017 as samples to run an OLS regression.The results show that the key factors that influence the interest rate pricing are issuing size,maturity,credit,issuing year,local government rating and industry.Furthormore,taking into account the revenue risk,it is assumed that the market demand of a PPP project each year follows geometric Brownian motion.The thesis established the financial evaluation model based on the profitability indicator and repayment indicator by comprehensively considering the interest appeals of stakeholders in PPP projects.The feasible structure that contains the decision-making variables are put forward and the debt size decision-making model is established by normalizing the utility of financial evalution indicator,as well as formulating the process of debt size decisionmaking in refinancing.Finally,a case,i.e.the metro PPP project in Shenzhen city,is studied to demonstrate the validity of the model.Mento Carlo simulation is carried out to analyze the revenue risk,by which to evaluate the influence on financial evaluation indicator.The optimal debt size is figured out by iterative computations under a given feasible structure.And how capital cost and replacement ratio of debt influence the optimal debt size and the maximum value of utility are calculated by sensitivity analysis.In general,the results show that the optimal debt size and the maximum value of utility increase with the increase of replacement ratio of debt,and the optimal debt size and the maximum value of utility decrease with the increase of capital cost.