Whenever an agreement is signed, careful attention must be focused on whether the contract or agreement in question properly addresses the issues facing the parties.
One common issue found in Infrastructure Ontario agreements is the need for the contractor to provide collateral for the loan. This can prove to be a challenge, given neither the project company nor the contractor own the building or the land. As such, the project company and contractor will need to provide other security, which security may include:
- Provision of a strong balance sheet with a covenant to pay;
- Guarantees from a parent corporation with a strong balance sheet;
- The purchase of performance bonds and labour and material payment bonds;
- Cash collateral;
- Involvement of strategic partners in the agreement;
- Infrastructure investment management;
- Suitable insurance; and
- Assignment of key contracts, including the Project Agreement, Construction Contract and agreements with subcontractors, to the lender as collateral.
Infrastructure Ontario and the owner of the project, referred to as the "Sponsor" are primarily interested in seeing the project completed. As such, a demonstrated ability to obtain financing is a prerequisite to being qualified to bid on a project. As such, taking steps to procure financing must start immediately following a decision being made to pursue a project.
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