International Finance Corporation <ul><li>Founded in 1956 to meet the needs of the private sector </li></ul><ul><li>Part o...
IFC’s Structured Finance Group <ul><li>Created in 2000 </li></ul><ul><li>Objectives: </li></ul><ul><ul><li>Provide clients...
Private Capital Flows to Emerging Markets Source: Institute of International Finance, January 2003 (billions of U.S. dolla...
Financial Assets in Selected Countries Source: Financial Market Trends, No. 80, September 2001, OECD;  Goldman Sachs 2000 ...
Domestic Securitization
Domestic Securitization Mortgages and SMEs “ Residential mortgage loans as a percentage of the consolidated assets of the ...
Domestic Securitization US Bond Markets and MBS-ABS Source: The Bond Market Association, 2003: Q1 MBS accounts for 23% and...
Domestic Securitization Benefits <ul><li>For Client: </li></ul><ul><ul><li>Reduce capital required to hold financial asset...
Domestic Securitization Example School or University Institutional  Investors Student Loans or  Future Tuition Receipts Ca...
Local Currency Partial Credit Guarantees
Local Currency Partial Credit Guarantees Basics <ul><li>The guarantee can be used for either a loan or bond. </li></ul><ul...
Local Currency Partial Credit Guarantees Typical Structure Years 40 60 80 1 2 3 4 5 6 7 8 8 Year Amortizing Bond with 10% ...
Local Currency Loans and Hedges
Local Currency Loans and Hedges Basics <ul><li>Available only in countries in which cross-currency swap markets exist. </l...
Local Currency Loans and Hedges Available Currencies ASIA EUROPE OTHER Indian Rupee Hungarian Forint Chilean Peso Indonesi...
IFC’S Track Record in Local Currency <ul><li>Structured Transactions (Partial Guarantees and Securitizations) </li></ul><u...
Track Record <ul><li>Completed 26 transactions in 12 different countries </li></ul><ul><li>Mobilized a total of US$1,952mn...
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Lee Meddin

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Lee Meddin

  1. 2. International Finance Corporation <ul><li>Founded in 1956 to meet the needs of the private sector </li></ul><ul><li>Part of the World Bank Group with a shared Board and President, but separate developmental mandate, staff, capital base and operating/financial policies </li></ul><ul><li>Largest multilateral source of debt and equity financing for private enterprise in developing countries </li></ul><ul><li>Consistent AAA / Aaa credit ratings </li></ul><ul><li>Products and services offered include loans, equity, quasi-equity, risk management products (including swaps, options, and local currency loans), structured products (including partial guarantees and securitizations), and advisory services </li></ul>
  2. 3. IFC’s Structured Finance Group <ul><li>Created in 2000 </li></ul><ul><li>Objectives: </li></ul><ul><ul><li>Provide clients with long-term local currency financing </li></ul></ul><ul><ul><li>Enable clients to access new investors </li></ul></ul><ul><ul><li>Act as a catalyst to mobilize additional financing for clients </li></ul></ul><ul><ul><li>Promote development of domestic capital markets </li></ul></ul><ul><ul><li>Provide the minimum amount of credit enhancement necessary in order to facilitate a successful transaction </li></ul></ul><ul><li>Products Include: </li></ul><ul><ul><li>Local currency and cross-border securitization </li></ul></ul><ul><ul><li>Local currency and cross-border partial credit guarantees </li></ul></ul><ul><ul><li>Risk sharing and liquidity facilities </li></ul></ul><ul><ul><li>Credit Derivatives </li></ul></ul>Local Currency Partial Guarantee Cross Border Partial Guarantee Local Currency Securitization Cross Border Securitization FX Earnings Asset Size Infrastructure & most Large Corporates Large Exporters & some Large Corporates Mortgages, SME and Consumer Loans SME Exporters P R O D U C T M A T R I X
  3. 4. Private Capital Flows to Emerging Markets Source: Institute of International Finance, January 2003 (billions of U.S. dollars)
  4. 5. Financial Assets in Selected Countries Source: Financial Market Trends, No. 80, September 2001, OECD; Goldman Sachs 2000 Portfolio Strategy Latin America (US$ millions)
  5. 6. Domestic Securitization
  6. 7. Domestic Securitization Mortgages and SMEs “ Residential mortgage loans as a percentage of the consolidated assets of the financial system grow from next to nothing to 25% at moderate levels of economic development and up to 40% in industrial countries.” Source: “Housing: Enabling Markets to Work”, IBRD “ SMEs (small and medium-sized enterprises) make up over 95% of enterprises and account for 60-70% of total employment in most countries.” Source: “SMEs: Job Creation and Growth”, OECD
  7. 8. Domestic Securitization US Bond Markets and MBS-ABS Source: The Bond Market Association, 2003: Q1 MBS accounts for 23% and ABS for 8% of the US bond market. The combined MBS-ABS segment represents the largest component (31%) of the $20.6 trillion US bond market. $1.8T $3.3T $2.4T $4.9T $1.6T $2.5T $4.1T
  8. 9. Domestic Securitization Benefits <ul><li>For Client: </li></ul><ul><ul><li>Reduce capital required to hold financial assets. </li></ul></ul><ul><ul><li>Increase capacity to originate new assets and servicing fees. </li></ul></ul><ul><ul><li>Improve key balance sheet ratios, risk management, operational efficiency. </li></ul></ul><ul><ul><li>Use cost-effective, alternative funding mechanism, which often remains available under stress. </li></ul></ul><ul><li>For IFC: </li></ul><ul><ul><li>Access to assets that are difficult to originate, have a large developmental impact, and are often not provided in sufficient quantity by other lenders. </li></ul></ul><ul><li>For Investors: </li></ul><ul><ul><li>High-quality long-term assets. </li></ul></ul><ul><ul><li>More efficient allocation of risk across the financial sector. </li></ul></ul>
  9. 10. Domestic Securitization Example School or University Institutional Investors Student Loans or Future Tuition Receipts Cash + First Loss Position of Securitization Senior Notes Securitization Vehicle Mezzanine Risk IFC
  10. 11. Local Currency Partial Credit Guarantees
  11. 12. Local Currency Partial Credit Guarantees Basics <ul><li>The guarantee can be used for either a loan or bond. </li></ul><ul><li>Allows borrower to access new investors for long-term local currency financing. </li></ul><ul><li>Allows IFC to provide credit in local currency and mobilize additional financing for the client. </li></ul><ul><li>Promotes development of domestic bond market. </li></ul><ul><li>The guarantee is structured to reduce probability of default and increase recovery given default. </li></ul><ul><li>IFC’s objective is to offer the minimum amount of guarantee necessary in order to facilitate a successful transaction. </li></ul>
  12. 13. Local Currency Partial Credit Guarantees Typical Structure Years 40 60 80 1 2 3 4 5 6 7 8 8 Year Amortizing Bond with 10% Coupon and 40% Guarantee 100 20 Outstanding Principal Baht Guarantee amount of 40 baht to year 5 Guarantee declines proportionately with bond years 5 - 8 Debt Service
  13. 14. Local Currency Loans and Hedges
  14. 15. Local Currency Loans and Hedges Basics <ul><li>Available only in countries in which cross-currency swap markets exist. </li></ul><ul><li>IFC intermediates the swap on behalf of the client. </li></ul><ul><li>With a local currency denominated loan, client makes all interest and principal repayments in the local currency. </li></ul><ul><li>With a local currency hedge, the client can swap either new or existing hard currency loans from any lender into local currency obligations. </li></ul>
  15. 16. Local Currency Loans and Hedges Available Currencies ASIA EUROPE OTHER Indian Rupee Hungarian Forint Chilean Peso Indonesian Rupiah Polish Zloty Mexican Peso Korean Won Slovak Koruna South African Rand Philippine Peso Czech Koruna   Thai Baht    
  16. 17. IFC’S Track Record in Local Currency <ul><li>Structured Transactions (Partial Guarantees and Securitizations) </li></ul><ul><ul><li>20 transactions in the last few years (excludes cross-border deals) </li></ul></ul><ul><ul><li>9 different currencies </li></ul></ul><ul><ul><li>Chile, Colombia, India, Korea, Mexico, Saudi Arabia, South Africa, Russia, and Thailand </li></ul></ul><ul><li>Local Currency Loans and Hedges </li></ul><ul><ul><li>60 transactions in the last few years </li></ul></ul><ul><ul><li>9 different currencies </li></ul></ul><ul><ul><li>Czech Republic, India, Indonesia, Korea, Mexico, Philippines, Russia, South Africa, and Thailand </li></ul></ul><ul><li>Bond Issuance </li></ul><ul><ul><li>29 different currencies </li></ul></ul><ul><ul><li>AUD, CAD, CHF, COP, CZK, DEM, ECU, EEK, EUR, FMK, GBP, GRD, HKD, IRS, ITL, JPY, LUF, NLG, NZD, PHP, PLN, PTA, PTE, RUR, SEK, SGD, SKK, USD, ZAR </li></ul></ul>
  17. 18. Track Record <ul><li>Completed 26 transactions in 12 different countries </li></ul><ul><li>Mobilized a total of US$1,952mn (US$842mn during FY03) with IFC’s credit exposure of only US$403mn </li></ul><ul><li>Russian Standard Bank (B) (two transactions) </li></ul><ul><li>KoMoCo (A) (two transactions) </li></ul><ul><li>Sogeko (C) </li></ul><ul><li>Bharti Mobile (B) </li></ul><ul><li>Ballarpur Industries (B) </li></ul><ul><li>NIIT-Citibank (A) </li></ul><ul><li>Saudi Orix Leasing (B) </li></ul><ul><li>SAHL (A) </li></ul><ul><li>Kiwane (A) </li></ul><ul><li>Garanti Leasing (C) </li></ul>(A) Local currency securitization (B) Local currency partial guarantee (C) Cross-border securitization (D) Cross-border partial guarantee <ul><li>Municipality of Tlalnepantla (B) </li></ul><ul><li>Banco BBA (D) </li></ul><ul><li>UBB (D) </li></ul><ul><li>Triple A (B) </li></ul><ul><li>Banco Davivienda (B) </li></ul><ul><li>Titulizadora Colombiana (A) (four transactions) </li></ul><ul><li>Diego Portales (A) </li></ul><ul><li>Exportadores II (A) </li></ul><ul><li>TelecomAsia(B) </li></ul><ul><li>Emerging Asia CBO(C) </li></ul>
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