PPP Project-backed Security Design In Government Payment Model

Limited to long maturity and capital illiquidity,the Public-Private-Partnership(PPP)project in China could benefit from the securitization by repacking the maturity,credit outstanding and liquidity.Short-term support from the government,long-term back up by high operation efficiency and the capital management are known as the three pillars of China's PPP.In terms of capital management,asset-backed securities could be used as an important tool to help PPP projects to enter as well as to exit the capital market.This paper tries to apply securitization to PPP projects by designing a financial instrument backed by a Sewage Treatment project.Based on the ‘Guiyang City Nanming River Water Environment Comprehensive Treatment Phase II',we are carrying out the analysis of corresponding structure,returns and risks parameters to design an project-backed security as the general procedure of securitization designing.The rest of this paper are constructed as following:Chapter 1 talks about the institutional environment for the securitization of China's PPP projects,including the circumstance of finance,feasibility and necessity as well as the fundamental functions combined with its underlying idea.Chapter 2 is the integrated procedure of product designing.As the workflow of the ABS design,we take the trading arrangements,issuing parameters,credit enhancement as well as the income distribution into consideration.Product pricing is based on the fundamental interest rate determined by the Central Bank plus a certain fluctuation range.And finally,the market share taking and target customers are also a part of this discussion.Strengthens and weakness analysis are discussed in Chapter 3,the policy treatments and demand – supply theory will be the focus and multi-aspects of lenders as well as borrowers will be taken into consideration.The promotion of the product talked about in Chapter 4 includes the marketing strategy and budget assessment.The major contribution of this paper lies in the research of a new way of financing a PPP project can take,providing more possibilities for the physical investments.The securitization of PPP projects in China is still in under-implementation,we hope the comprehensive analysis of the design of an asset-backed security could provide some ideas to which the finance of PPP projects can refer.