Transparency in project bond ratings: Assessment of rating methodologies and development of a proven rating simulator

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The EU promotes the use of project bonds to develop a solid source for funding infrastructure projects. During an internship with the financial advisory team at UniCredit, the project finance rating methodologies of the major rating agencies were analyzed and a rating simulator was built to gain insights into the main rating drivers. The resulting rating simulator is not able to fully forecast a rating but provides guidance for structuring future projects. After analyzing two case studies, it appears that S&P uses the most comprehensive, Moody’s the most transparent and Fitch the most flexible methodology to rate project finance bonds.