CMOTDibbler writes...

If it doesn't get to that point then the commercial lenders have nothing to worry about.

And if commercial lenders dont come on board at all they will have nothing to worry about either.

We're talking about loans not investments.

There have been lots of different funding options floated. e.g.

Innovative funding techniques, including the introduction of private equity, are likely to be considered. However, debt will be the main source of funding for the project beyond the $29.5 billion of equity the government is contributing – and with the government able to borrow 10-year money at a rate of about 2.5 per cent, project costs will be lower and returns higher if NBN Co borrows backed by a government guarantee, or the government borrows for the project directly. http://www.smh.com.au/busines s/the-economy/broadband-netw ork-cost-blowout-pressures-g overnment-on-funding-20150824-gj6etl.html#ixzz3rwFVLjf6

and

But the government has not increased its funding cap of $29.5 billion, meaning NBN will have to raise up to $26.5 billion from private sector sources including banks, bond raisings, international markets or even by borrowing from the government itself starting from June 2017.

http://www.smh.com.au/busines s/the-economy/nbn-set-to-ann ounce-cost-blowout-20150823-gj5ze3.html#ixzz3rwHXafJ9

The only thing that is certain is that when it is said "innovative" funding techniques will be required, you know they are struggling to make an attractive case to lenders and/or investors.

We agree there is no explicit guarantee from the government.

Yep. Lenders will want something more concrete than a hunch to lend on though. I have seen many businesses denied funding over less obvious problems than NBN Co has. The lack of a guarantee is a big one.

If the government decides to flog off the NBNCo then it is only a problem for the commercial lenders if the sale price is lower than the value of the loans.

Its a big problem if its not just commercial lenders involved. Given the blow outs, and necessary funding required going forward, that hasnt been mentioned anywhere (e.g. FTTP upgrade), the debt level is going to need to be huge.

As NBN Co keeps dropping the IRR, the opportunity for "innovative" funding channels reduces.

NBN chief executive Bill Morrow said NBN hasn't worked out how much to charge phone companies that will use its wholesale network when it is finished. He said the latest round of increases would not be passed on to consumers because NBN was reducing its expected rate of return.

"It has zero impact on the prices that we charge ISPs and therefore zero impact on what we're charging end users ... because we're lowering the internal rate of return," he said. http://www.smh.com.au/busines s/the-economy/nbn-set-to-ann ounce-cost-blowout-20150823-gj5ze3.html#ixzz3rwHK0v6i

It is questionable whether NBN Co is capable of borrowing up to $26.5 billion in its own right to fund a project that offers such a skinny return, particularly when the new corporate plan states there are many variables that could have an impact on costs, revenue and timing. http://www.smh.com.au/busines s/the-economy/broadband-netw ork-cost-blowout-pressures-g overnment-on-funding-20150824-gj6etl.html#ixzz3rwIgnoID

Then there is the reality, that NBN Co wont even be profitable, and hence be able to generate excess cash for upgrades, until at least 2022. HArdly attractive to investors, or to a commercial lender to whom you have to get to believe in your business case. They cant just rock along with the made up type stuff that Ergas and Co did, and expect a bank to believe such rubbery figures. NBN need to present the whole ugly story, with no government guarantee to underwrite it. How do you think that is going to go for them?