Dynamic Debt Choice of Infrastructure Finance: Loans, Bonds, and the Project Lifecycle
Type
working paper
Date Issued
2026-02-16
Author(s)
Abstract
We study how risk reallocation over the project life cycle shapes the debt instrument choice (loans vs. project bonds) in infrastructure projects. Using a global database on infrastructure projects (2000–2025), we assemble a panel of project financing rounds mapped to planning, construction, and operation, and exploit Basel III timing and cross-country variation in market depth and sovereign ratings. Bond finance becomes significantly more likely once projects enter operation and as financing rounds accumulate. Government support for an infrastructure project further shifts financing rounds toward bonds. Following Basel III, riskier pre-operation financing rounds are shifting toward bonds and away from bank-heavy loan syndicates. This effect is stronge for bond reallocation in deeper financial markets. Sovereign downgrades lower, and upgrades raise the likelihood of bond financing. We establish new facts and causal evidence on when traditional bank loans are replaced by marketable long-term bonds or private debt, and how regulation and sovereign status rewire infrastructure capital structure.
Language
English (United States)
Keywords
Infrastructure Finance
Leverage
Project Bonds
Private Debt
HSG Classification
contribution to scientific community
Refereed
No
Subject(s)