Infrastructure bond is a type ofbond issued either by private corporations or bystate-owned enterprises to finance the construction of aninfrastructure facilities such as highways, ports, railways, airport terminals, bridges, tunnels, pipelines, etc.[1][2] These bonds may be nominated both in local and in more stable foreign currencies, such as U.S. dollars or euros.[3] Infrastructure bonds are popular in developing economies where there is a strong demand for infrastructure.[4]
As a rule, the issuer of such securities, after the construction of an infrastructure facility is completed, receives it on aconcession for some time (most often several decades) and collects the payments from the facility users (for example, atoll road). Quite often, the state (or several states), on the territory of which this object is being built, provides guarantees for the issued bonds, which makes them attractive to a larger number of market participants, as doing so reduces the risk. Due to the long payback period of infrastructure facilities, the bond circulation period is also quite long (often several decades); therefore, such bonds will mostly targetinstitutional investors including insurance companies and pension funds.[2] To make such bond even more attractive, the state authorities may arrange certain interest and tax benefits.[5][6]