Question

Which of the following is (or are) not true about off-balance finance? a.Investor is limited liability...

Which of the following is (or are) not true about off-balance finance?

a.Investor is limited liability to project loss

b.Investor’s risk profile is less affected by the project

c.Project’s debt to equity ratio has to be lower than the investor’s debt to equity ratio

d.Securitization of project revenue is not allowed in off-balance financing.

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Answer #1

Securitization is possible in off balance sheet financing because one can create SPV and can sell it to the SPV and get the money in lumpsum.So no one in the world gets to know about this.D/E will be lower in case of off balance sheet financing because the debt is not recorded on balance sheet.So its a true statement and investor will have a limited liability because if the debt is not recorded anywhere then no one will have any idea about it and one can settle it off at a lesser amout which normally happens in private companies.

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