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Inter-American Development Bank (IDB) Private Sector Department

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Presentation on theme: "Inter-American Development Bank (IDB) Private Sector Department"— Presentation transcript:

I D B O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S Hans Schulz Private Sector Department March 2007

1 Inter-American Development Bank (IDB) Private Sector Department
Regional multilateral institution with 47 member countries dedicated to accelerate economic & social development in Latin America and the Caribbean Private Sector Department Target Clients Responsible for non-sovereign guaranteed operations at IDB Privately controlled entities in all sectors of the economy Utilities and other infrastructure operators Banks and other financial market institutions Corporates with annual sales of US$100 million and above

2 IDB’s Competitive Advantages
Deep Knowledge and Excellent Relations with Latin America and the Caribbean Oldest and largest multilateral lender to Latin America and the Caribbean : US$ 6-7 billion annually Cooperative, long-term relationship with member countries Helps mitigate political risks Exemption from withholding taxes and de facto preferred creditor status Solid Financial Position AAA/Aaa Rating (S&P, Moody’s) Authorized capital of US$101 billion Ability to extend tenors at market pricing IDB Value-Added “Umbrella effect” helps to attract B-lenders Catalytic role: IDB financing mobilizes private investment Internationally recognized environmental, social, labor and health standards provide comfort to governments, communities, lenders and sponsors Flexible risk sharing arrangements

3 Recent Strategic Changes
2005 2007 Eligible Sectors Infrastructure, Captial Markets Operations, Trade Finance ALL ECONOMIC SECTORS, MORE FLEXIBLE USE OF PROCEEDS* Eligible Clients Privately Owned Entities PRIVATELY OR STATE- OWNED CORPORATE ENTITIES AND FINANCIAL INSTITUTIONS** Currency All Transactions in US$ FINANCING AND GUARANTEES ALSO IN LOCAL CURRENCIES Limits IDB participation limited to US$75 Million / 25% of Project Cost US$200 MILLION PER PROJECT*** / 50% OF PROJECT COST Turnover times Time-consuming internal Approval Processes MORE EFFICIENT, FASTER PROCESSES, ADAPTED TO MARKET NEEDS * Exceptions: negative exclusion list ** Without Sovereign Guarantee *** Up to US$400 Million in Exceptional Cases

4 Lending Products A/B Loans “A” – IDB Loan Tranche
“B” – Participation of Market Players (international banks and Institutional Investors) IDB is Lender of Record Project Finance Warehousing lines Revolving credit lines Refinancing Senior and subordinated Loans Tenors: up to 30 years (average: years) Financing in local currencies (depending on market conditions for swaps)

5 Guarantee Products Characteristics:
Partial Credit Guarantees (covering all risks – up to 50%; up to 100% within RTFFP) or Political Risk Guarantees Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale) Guarantee amount can vary or stay constant over the tenor (up to 30 years), also amortizing securities Guarantee capped in US$ - Guarantee payment and reimbursement claim can be in local currency of underlying security IDB-reimbursement rights can be subordinated to other investors IDB-Gurantee is unconditional Transaction types: Bond Issues Project Finance Asset-Backed Securities (ABS), i.e. Mortgage-Backed Securities Securities backed by Future Flows (i.e. Diversified Payment Rights) Structured Trade Transactions (Investment funds, Corporate finance)

6 Financial Markets: Products and Services
Capital Markets Trade Finance Financial Institutions (new mandate) Structured Finance (e.g. securitizations) Bond issues Investment funds Regional Trade Finance Facilitation Program (TFFP) Trade finance facilities (TFFs) Structured trade finance General Purpose: Lending facilities Subordinated debt (Tier II) Partial Credit Guarantees

7 Trade Finance: Trade Finance Facilitation Program
Program Characteristics Issuing Banks: Private or state-owned banks incorporated in IDB Borrowing Member Countries, track record in trade finance, satisfactory credit worthiness, compliance with IDB standards Confirming Banks: Any international/regional bank with recognized track record in international trade financing Participants No joining costs Usually, guarantee fees equivalent to 75% of confirmation fee / spread on the TFFP-guaranteed amount Costs Letters of Credit Export and import financing funded by Confirming Banks International Guarantees (Bid, Performance, Advance Payment Bonds) and Stand-by Letters of Credit Eligible Transactions Up to 100% per individual transaction Coverage Level Up to 3 years Tenor (i) Max. Total Program exposure at any time: US$400 million (ii) Up to US$40 million credit line per Issuing Bank; (iii) Up to US$120 million exposure per IDB Borrowing Member Country Applicable Exposure Limits Credit Guarantee (“CG”) in favor of Confirming Banks to cover the risk they take on eligible trade financing instruments issued by LAC Issuing Banks Nature

8 Operational Guidelines
Project Costs Defined as securities issuance, funding program or total capital investments over relevant period Security Requirement Similar to commercial lenders IDB Participation Up to 50% of project costs with a cap of US$200mn Currency USD, Euro, Yen, local currency subject to market conditions Maturity Up to 30 years Pricing Market-based Fees Applied as appropriate to each project Expenses Due diligence

9 Portfolio – Approved Projects (in US$ million)

10 Portfolio – Projects by Sectors (as of March 2007)
A-Loans B-Loans Guarantees US$ 3,219.5m US$ 3,699.2m US$ 1,810.3m

11 Financial Markets - Transactions
Brazil Brazilian Infrastructure Investment Fund (BIIF) Brazilian Infrastructure Securities Warehousing Facility Chile Securitizadora Security: revolving Mortgage-Backed Loan Facility Costanera Norte Highway System Infrastructure Bond Santiago-Valparaiso-Vina Toll Road Colombia Colpatria Mortgage Bond Mexico Su Casita MBS Guarantee Facility Metrofinanciera Mortgage Warehouse and MBS Guarantee Facility Peru BBVA Banco Continental: Senior A/B-, and Subordinated loan BBVA Banco Continental: MBS Guarantee Facility Graña y Montero Asset-Backed Bond Regional Central American Mezzanine Infrastructure Fund Crecera Trade Finance Facility Darby Fund IIG Trade Finance Facility

12 Infrastructure: Award-winning Deals
Energy ATE II Km Power Transmission Line in Brazil Campos Novos MW hydro-power plant in Brazil Novatrans - 1,278 kilometer power transmission line in Brazil TermoPernambuco MW thermal power plant in Brazil Termobahia MW thermal power in Brazil Bajio Energy MW combined cycle plant in Mexico Light Energy Services - CAPEX program for a power distribution company in Brazil Termoelectrica del Golfo MW thermal power plant in Mexico Aguaytia MW integrated power project in Peru Transportation Quito Airport - Upgrade of International Airport in Ecuador Camisea - Natural gas and liquids pipeline in Peru Costanera Norte Highway - Urban highway system in Chile Rutas del Paciíico kilometer toll road in Chile Yucatán Gas Pipeline Km. Gas pipeline in Mexico Water & Sanitation Antofagasta - Seawater desalination plant in Chile Rio Bogotá - Water treatment facility in Colombia

13 Contact Information Hans Schulz Head of Financial Markets Private Sector Department Inter-American Development Bank 1300 New York Avenue, N.W. Washington, DC – USA Tel: (1) Fax: (1)

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