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Nord/LB

Project Finance Model

Enabling one of Germany's largest commercial banks to determine their funding requirements and optimise their sources of funding.

Expanded functionality

We replaced the existing model which only accepted one debt tranche, to efficiently manage five

Intelligent forecasting

Improved functionality in the new model allowed returns to be calculated for up to three equity investors

Completely flexible

Since the initial scoping session, the forecasting model has been adapted for use with another project

Challenge

Nord/LB’s existing project finance model only had the functionality to size and sculpt a single tranche of senior debt. To scope out bigger projects, they needed a model that handled up to five tranches, with the option to allocate costs to be funded by each debt tranche, and to incorporate scenarios that would calculate the returns for up to three equity investors and sculpt the dividend distribution between investors.

Solution

We held a model scoping session with the lead bank to understand what variables and functionality the new model required. We then worked in additional functionality to the model, which included fixing the size of individual tranches of debt, selecting certain expenses to be funded by specified debt tranches, calculating the repayment profile for each debt tranche, and putting in place a DSRF, a DSRA or a combination of both.

Results

The new model is simple to use despite the complex functionalities, allowing all tranches of debt to be resized and repayment profiles re-sculpted quickly and easily, via a macro. The model can also switch between scenarios with ease.

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