Securitization of PPP project payment: reconfiguration of underlying assets

With the intensification of public-private partnership (PPP) compliance reviews and financial oversight, financing for PPP projects has become more difficult, and funding pressures on private investors have increased sharply. How to revitalize the vast quantity of works accounts receivable of PPP projects has become a hot issue holding the attention of the industry, and asset securitization is one path that is currently being tried. This article looks at reconfiguring the underlying assets during the asset securitization of works funds.

The asset securitization of PPP project works money has its own particular origin and background. It is a type of asset securitization of enterprise accounts receivable, with the underlying assets being the contractor’s claims that consist of the works accounts receivable under a PPP project.

The employer pays works progress money to the contractor on a monthly basis, usually paying for about 80% of the work quantities completed by the contractor during the month in question. In such a circumstance, as the payment period for the accounts receivable is relatively short, there is no objective requirement for the contractor to sell its accounts receivable claims for the period in question to raise financing.

Wang Jihong is a partner and Tang Hongwei is an associate at Zhong Lun Law Firm