In Project Finance transactions, it is common for the borrower to request that hedging banks spread over time the mark-to-market value of a hedge that has been terminated or restructured. This spread is implemented through an adjustment to the fixed rate of the final project hedge.

This situation typically arises in the following contexts:

• Refinancing, where certain hedging instruments are early terminated or, more commonly, novated by the existing hedging banks to the new hedging banks.

• Financial close management, where the economic outcome of a pre-hedge needs to be incorporated into the final hedging package.

Download (PDF)