Measuring infrastructure debt credit risk

In this paper, the authors develop a framework to measure the credit risk of unlisted infrastructure debt, including the first formulation of "distance to default" in infrastructure project finance. The authors propose to use the debt service cover ratio (DSCR or the ratio of the firm's free cash flow to its debt service in a given period), which is routinely collected by project finance lenders, to measure and benchmark credit risk in infrastructure project finance.