Infrastructure bond is a type of bond issued both by private corporations and by state-owned enterprises to finance the construction of an infrastructure facility (highways, ports, railways, airport terminals, bridges, tunnels, pipelines, etc.) These bonds may be nominated both in local and in more stable foreign currencies, such as U.S. dollars or euros. Infrastructure bonds are popular in developing economies where there is a strong demand for infrastructure.

Overview

As a rule, the issuer of such securities, after the construction of an infrastructure facility is completed, receives it on a concession for some time (most often several decades) and collects the payments from the facility users (for example, a

toll road A toll road, also known as a turnpike or tollway, is a public or private road (almost always a controlled-access highway in the present day) for which a fee (or '' toll'') is assessed for passage. It is a form of road pricing typically implemen ...

). Quite often, the state (or several states), on the territory of which this object is being built, provides guarantees for the issued bonds, which makes them attractive to a larger number of market participants, as doing so reduces the risk. Due to the long payback period of infrastructure facilities, the bond circulation period is also quite long (often several decades); therefore, such bonds will mostly target

institutional investors An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...

including insurance companies and pension funds. To make such bond even more attractive, the state authorities may arrange certain interest and tax benefits.

References

{{Public infrastructure topics, state=collapsed International finance Infrastructure

Overview

See also

References