Loan Guarantee Instrument for Trans-European Transport Network Projects

Loan Guarantee Instrument for Trans-European Transport Network Projects is an innovative financial instrument set up and developed jointly by the European Commission and the European Investment Bank (EIB) which aims at facilitating a larger participation of the private sector involvement in the financing of Trans-European Transport Network infrastructure (“TEN-T”).

This new instrument will facilitate private sector involvement in core European transport infrastructure, which often faces difficulties in attracting private-sector funding due to the relatively high levels of revenue risk in a project’s early operating stages. The LGTT, which is part of the EU’s TEN-T programme and the EIB’s Action for Growth initiative, it will partially cover these risks and consequently improve significantly the financial viability of a project. LGTT will be financed with a capital contribution of €1 billion (€500 million each from the Commission and the EIB) which is intended to support up to €20 of senior loans. The LGTT aims to facilitate investment in TEN-T projects by significantly improving the ability of the borrower to service senior debt during the initial operating period or “ramp-up” phase of the overall project, irrespective of initial traffic revenue. Its design will substantially enhance the credit quality of the senior credit facilities, thereby encouraging a reduction of risk margins applied to senior loans to the project. These savings should surpass the cost to the borrower of the guarantee, resulting in a financial value-added for the project.

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