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      Question

      A lender requires a 'Tail' in a project finance deal.

      What does this refer to?
      A The period between the end of the loan tenor and the end of the concession period. Correct Answer Incorrect Answer
      B The final bullet payment made at the end of the loan. Correct Answer Incorrect Answer
      C The grace period provided for interest payments. Correct Answer Incorrect Answer
      D The extra collateral provided by the sponsor. Correct Answer Incorrect Answer
      E The liquidation value of the assets. Correct Answer Incorrect Answer

      Solution

      A 'Tail' is a buffer period. If a loan is for 10 years but the concession is for 12, the 2-year "tail" provides a safety margin if the project needs to refinance or delay repayment.

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