Infrastructure bond explained

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.)[1] [2] These bonds may be nominated both in local and in more stable foreign currencies, such as U.S. dollars or euros.[3] Infrastructure bonds are popular in developing economies where there is a strong demand for infrastructure.[4]

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). 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 including insurance companies and pension funds.[2] To make such bond even more attractive, the state authorities may arrange certain interest and tax benefits.[5] [6]

See also

Notes and References

  1. Web site: Infrastructure Bonds with Tax Saving Benefits . 27 September 2014 . . 13 August 2021 . en.
  2. Web site: Bond Program to Finance Infrastructure . . 13 August 2021 . en.
  3. Web site: AMP Capital Global Infrastructure Bond Strategy . AMP Capital . 13 August 2021 . en.
  4. Web site: Treasury Bonds CBK . . 13 August 2021.
  5. Web site: IFCI Tax Saving Long Term Infrastructure Bonds Series-I . . 13 August 2021.
  6. Web site: Chakrabarty . Amitava . Infrastructure Bond: Confusion over Tax-Saving Vs Tax-Free Bonds makes taxpayers pay more tax than benefit availed . . 13 August 2021 . 27 March 2021.