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is a fairly traditional tool in project finance. For instance, most of Gazprom's new pipelines are not financed on a standalone basis (that's still sen as too risky), but are backed by the revenue streams from existing pipelines and associated exports.

Structured commodity export finance is the same - financing collateralised by existing export revenues (which can then be used for further investment or for other corporate purposes).

During the bubble years of 2005-2007, project finance banks did try to recycle capital by creating CLOs (collateralised loan obligations) - effectively bundling portfolios of project finance assets and "unitising" them, ie creating securities against the portfolio of revenue streams from these projects.

The market for that is dead due to the crisis, but I peronally think it's dangerous: one of the reasons project finance is safe is that banks keep the paper on their books; if they begin to be able to dump it on other investors in ways that are not completely transparent (why care about specific clauses in a deal if  that deal represents only 1/100th of the portfolio for the ultimate owners) - pushed to extremes, we saw where that went with CDO ABSs.

Where I actually fundamentally disagree with you is that in the peer-to-peer mechanisms, there isn't anyone to vouch - by having skin in the game - the quality of the underlying projects. By having banks doing the lending and keeping the assets on their books, you do have that quality control. And as we know, this is a vital service.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 3rd, 2010 at 10:34:25 AM EST
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