B-LOAN PROGRAM
  January 2010
IDB - WHO WE ARE

 The IDB provides solutions to development challenges in 26 countries of
 Latin America and the Caribbea...
IDB - WHO WE ARE

 The IDB is the main source of multilateral financing and expertise for
 sustainable economic, social an...
IDB PRIVATE SECTOR
 Responsible for leading the Bank’s operations without sovereign
 guarantee

 Partners with commercial ...
STRUCTURED & CORPORATE FINANCE (SCF)
 SCF focuses on mid to large-cap transactions

 Transaction sizes (IDB funds)
      M...
STRUCTURED & CORPORATE FINANCE
 Focus on development effectiveness
 Key service sectors: basic infrastructure and financia...
OPPORTUNITIES FOR THE MAJORITY (OMJ)
 Set up as an incubator within the private sector to drive innovation and
 best pract...
OPPORTUNITIES FOR THE MAJORITY
 The Opportunities to the Majority initiative supports project with the
 potential to deliv...
OPPORTUNITIES FOR THE MAJORITY

Operating Principles

  Invest in business solutions to achieve a positive impact on the l...
IDB PRIVATE SECTOR FINANCIAL PRODUCTS

 A/B Loans

    “A Loan” – IDB Loan Tranche
             Usually the A Loan has a l...
MOBILIZATION MANDATE

Excerpt from the 8th Replenishment




    “ 2.82 Mobilization of additional funds. As part of its c...
B-LOAN STRUCTURE

                 Participation                        Loan
                 Agreement                   ...
PREFERRED CREDITOR STATUS (PCS)

 Preferred access to foreign exchange in the event of country foreign
 exchange shortage
...
PCS: CAPITAL TREATMENT OF B LOANS UNDER BASEL II

 Standardized approach:
 Banks may apply the local currency rating of th...
B-LOAN ADVANTAGE
                       Tenor profile in the region


                      INVESTMENT         NON INVESTM...
B-LOANS VS. SYNDICATED LOANS
      How do B-Loans differ from regular syndicated loans?

 Participations vs. Assignments
 ...
BENEFITS TO B-LOAN PARTICIPANTS

 Participants share IDB’s Preferred Creditor Status and therefore mitigate
 transfer and ...
BENEFITS TO B-LOAN BORROWER


 B-Loans complete the entire financial package

 Borrowers can achieve financing with longer...
BENEFITS OF B-LOANS TO IDB



 Helps the Bank meet its catalytic role

 Tool to spread the credit risk exposure

 Mobiliza...
PARTICIPANT’S VOTING RIGHTS
 100%:         Change in money terms

 100%:         Waive or amend conditions precedent

 67%...
INFORMATION SHARING


IDB shares with Participants all information we receive from Borrowers under
the Loan Agreement

Thi...
PARTICIPANT ELIGIBILITY

 Objective participant eligibility criteria

 “Eligible Financial Institution”

     Not incorpor...
B-LOANS VS. SYNDICATED LOANS
Participants in B-Loans have limited rights compared to typical syndicated
                  ...
B-LOAN PROGRAM

      Historical Results
      Historical Results




                       Number of B-Loans Closed: 58
...
PERFORMANCE HISTORY
                                          % write-off / A-loan outstanding (which has B Loan)

     8%...
SYNDICATIONS TEAM
                               Jozef Henriquez
                               Chief of Syndications Unit...
2009                       2009                        2009                         2008                     2008         ...
B loan january 2010
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Opportunities for the Majority B-Loan syndication

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B loan january 2010

  1. 1. B-LOAN PROGRAM January 2010
  2. 2. IDB - WHO WE ARE The IDB provides solutions to development challenges in 26 countries of Latin America and the Caribbean, partnering with governments, companies and civil society organizations The IDB lends money and provides grants. It also offers research, advice and technical assistance to improve key areas like education, poverty reduction and agriculture. Our clients range from central governments to city authorities and small businesses The Bank also seeks to take a lead role on cross-border issues like trade, infrastructure and energy
  3. 3. IDB - WHO WE ARE The IDB is the main source of multilateral financing and expertise for sustainable economic, social and institutional development in Latin America and the Caribbean. 26 Borrowing member and 22 non-borrowing member countries $10 billion in approved lending and grants over the past 12 months Backed by a AAA/Aaa rating by both Standard & Poors and Moody’s
  4. 4. IDB PRIVATE SECTOR Responsible for leading the Bank’s operations without sovereign guarantee Partners with commercial banks, institutional investors, co-guarantors, and other co-lenders to meet the growing of financial resources Target clients: Privately controlled entities in all sectors of the economy Utilities and other infrastructure operators Banks and other financial market institutions State-owned companies without a sovereign guarantee Corporates
  5. 5. STRUCTURED & CORPORATE FINANCE (SCF) SCF focuses on mid to large-cap transactions Transaction sizes (IDB funds) Minimum US$10 million Typical US$35 million or above Maximum US$200 million 50% of projects cost (25-40% if greenfield) Target clients: Privately controlled entities in all sectors of the economy Utilities and other infrastructure operators Banks and other financial market institutions State-owned companies without a sovereign guarantee Corporates with annual sales of US$100 million and above
  6. 6. STRUCTURED & CORPORATE FINANCE Focus on development effectiveness Key service sectors: basic infrastructure and financial markets Support green projects Better serve the needs of smaller economies Seek transactions that promote social inclusion Products Loans Guarantees Partial Credit Guarantees (covering all risks – up to 50% usually or up to 100% within Trade Finance Facilitation Program) or Political Risk Guarantees Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale) IDB-reimbursement rights can be subordinated to other investors
  7. 7. OPPORTUNITIES FOR THE MAJORITY (OMJ) Set up as an incubator within the private sector to drive innovation and best practices in applying market-based solutions to advance economic and social development at the base of the socioeconomic pyramid (BOP). US$ 250 million set aside from the Bank’s Ordinary Capital. Created to foster collaboration between the public and private sector, and civil society, to attract new resources to address poverty challenges in the region. Target clients: Private sector organizations, corporations, financial institutions, investment funds, and state-owned companies, without sovereign guarantees, operating in one or more of the 26 borrowing member countries of the IDB and interesting in engaging with the BOP. Organizations should be in sound financial health and be able to demonstrate a good record of corporate governance and environmental and social responsibility.
  8. 8. OPPORTUNITIES FOR THE MAJORITY The Opportunities to the Majority initiative supports project with the potential to deliver business solutions to the 360 million people in the region living at the base of the pyramid. To be eligible for financing the project must be: Financially and structurally sound. Innovative and with the capacity to be repeated and brought up to scale once proven successful. Structured to engage multiple stakeholders. Lending highlights Loans and partial credit guarantees Market-rates Long tenors Technical assistance provided with loans. Coverage between 25-50% of total project cost.
  9. 9. OPPORTUNITIES FOR THE MAJORITY Operating Principles Invest in business solutions to achieve a positive impact on the lives of the majority. Demonstrate that investing in underserved markets is good business. Apply innovation and creativity to fulfill unmet human needs and contribute to economic growth. Create new solutions through alliances with the public and private sectors and civil society. Share risk among several partners.
  10. 10. IDB PRIVATE SECTOR FINANCIAL PRODUCTS A/B Loans “A Loan” – IDB Loan Tranche Usually the A Loan has a longer tenor than the B Loan “B Loan” – Participation of Market Players (private investors like international banks, institutional investors and funds) The B Loan is pari passu with the A Loan, sharing the risk of the deal There is no guarantee on the B Loan from IDB IDB is Lender of Record
  11. 11. MOBILIZATION MANDATE Excerpt from the 8th Replenishment “ 2.82 Mobilization of additional funds. As part of its cofinancing activities, the Bank will step up its efforts to mobilize additional resources, particularly from private sources, for priority development initiatives, and especially for infrastructure and public utility projects carried out by the private sector.”
  12. 12. B-LOAN STRUCTURE Participation Loan Agreement Agreement Participants Borrower B Loan A+B Loans One loan agreement – IDB is lender of record and administers entire loan IDB fully shares project risk with participants Participation structure allows participants to benefit from IDB’s privileges and immunities
  13. 13. PREFERRED CREDITOR STATUS (PCS) Preferred access to foreign exchange in the event of country foreign exchange shortage Excluded from general country debt reschedulings Not subject to mandatory new money obligations under general country debt rescheduling Consistent universal recognition - Pakistan, Russia, Argentina Bank regulators exempt B Loans from mandatory country risk provisioning Allows rated transactions to pierce sovereign ceiling Recognized mitigant of country risk under Basel II
  14. 14. PCS: CAPITAL TREATMENT OF B LOANS UNDER BASEL II Standardized approach: Banks may apply the local currency rating of the borrower (as opposed to the foreign currency rating), recognizing the effective mitigation of transfer and convertibility risk Advanced Internal Ratings-Based (IRB) approach: Banks may reflect the country risk mitigation afforded by the B loan structure through lower country risk weighting
  15. 15. B-LOAN ADVANTAGE Tenor profile in the region INVESTMENT NON INVESTMENT PROJECT GRADE GRADE FINANCE UNCOVERED Generally (Without MDB Up to 5 yrs. Up to 3 yrs. Unavailable * umbrella) B-LOAN 5 yrs. or greater 3 – 5 yrs. 10 – 14 yrs. * Chile and Mexico are the only countries where international lenders have felt comfortable lending on a project finance basis without an ECA guarantee or MDB umbrella
  16. 16. B-LOANS VS. SYNDICATED LOANS How do B-Loans differ from regular syndicated loans? Participations vs. Assignments Assignments create direct contractual rights with the borrower Assigner becomes a “lender” with full voting and other rights Participant’s rights and obligations vis-à-vis the borrower are derivative IDB’s rights and obligations Lender of Record vs. Agency Role IDB is not acting as agent Agent is appointed by the lenders Agent acts under instruction of lenders Neither is a fiduciary
  17. 17. BENEFITS TO B-LOAN PARTICIPANTS Participants share IDB’s Preferred Creditor Status and therefore mitigate transfer and convertibility risk Where applicable, participants are exempt from mandatory country risk provisioning requirement Environmental and Social leadership Participants benefit from IDB’s relationship with host country governments (“halo effect”) Basel II has recognized the value of B-Loans, which can result in lower ascribed capital allocation (can use local vs. foreign ratings)
  18. 18. BENEFITS TO B-LOAN BORROWER B-Loans complete the entire financial package Borrowers can achieve financing with longer tenors than without umbrella cover B-Loan syndication can introduce new lending relationships to the Borrower Simplified administration with one point of contact Transaction is exempt from withholding tax
  19. 19. BENEFITS OF B-LOANS TO IDB Helps the Bank meet its catalytic role Tool to spread the credit risk exposure Mobilization of funds Gain additional sector expertise from other market players Maintain our finger on the pulse of the market
  20. 20. PARTICIPANT’S VOTING RIGHTS 100%: Change in money terms 100%: Waive or amend conditions precedent 67%: Acceleration by IDB at request of Participants 67%: Release security or waive negative pledge 67%: Waive or amend guarantees or support arrangements 67%: Change in ownership control provision 51%: Waive or amend financial covenants Consult: Waive or amend non-financial covenants (Percentages reflect consent level required, based on total B Loan amount)
  21. 21. INFORMATION SHARING IDB shares with Participants all information we receive from Borrowers under the Loan Agreement This includes: Regular financial reporting Knowledge of key credit events
  22. 22. PARTICIPANT ELIGIBILITY Objective participant eligibility criteria “Eligible Financial Institution” Not incorporated or residing in the country of the borrower or the project Not an export credit, governmental, or multilateral agency International investment grade rating from Fitch, Moody’s or S&P Non-investment grade and unrated financial institutions may be considered on a case-by-case basis
  23. 23. B-LOANS VS. SYNDICATED LOANS Participants in B-Loans have limited rights compared to typical syndicated loans B-Loan Syndicated Loan Consent right on “money” terms Full voting rights on all credit and (unanimous), security (67% majority) administrative matters and financial covenants (51% majority), subject to materiality Lender has full legal recourse to Borrower Has no contractual relationship with Borrower Disposals subject to Borrowers approval, but no limitations under Disposals are subject to IDB approval default scenario
  24. 24. B-LOAN PROGRAM Historical Results Historical Results Number of B-Loans Closed: 58 Number of B-Loans Closed: 58 Amount of B-Loan mobilized: $5.87 billion Amount of B-Loan mobilized: $5.87 billion Number of historical participants: 124 institutions Number of historical participants: 124 institutions
  25. 25. PERFORMANCE HISTORY % write-off / A-loan outstanding (which has B Loan) 8% 7% 6% 5% 4% 3% 2.16% 2% 0.48% 1% 0.47% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% 0.00% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -1% % Impaired Loan / A-loan outstanding (which has B Loan) 50% 45% 40% 35% 30% 25% 23% 21% 20% 19% 18% 15% 12% 10% 7% 6% 5% 0% 0% 0% 0% 0% 0% 0% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
  26. 26. SYNDICATIONS TEAM Jozef Henriquez Chief of Syndications Unit Tel: (1) 202-623-1424 Email: jozefh@iadb.org Brian Blakely Kristin Dacey Jaspreet Birk Senior Syndications Officer Syndications Officer Syndications Officer Tel: (1) 202-623-2991 Tel: (1) 202-623-3349 Tel: (1) 202-623-2345 Email: brianb@iadb.org Email: kristind@iadb.org Email: jaspreetb@iadb.org Kentaro Aoyama Eliana Duque Syndications Officer Office Assistant Tel: (1) 202-623-2811 Tel: (1) 202-623-3731 Email: kentaroa@iadb.org Email: elianad@iadb.org
  27. 27. 2009 2009 2009 2008 2008 2008 Crecera Finance Adeco Agropecuaria S.A. BBVA Banco Continental Gerdau Açominas Bicbanco Company and Pilagá S.R.L. Noble Argentina US$70,000,000 US$77,500,000 US$ 49,000,0000 US$ 10,000,0000 US$ 150,000,0000 US$ 90,000,0000 B Loan B Loan B Loan B Loan B Loan B2 Loan 5 years 2 years 5 years 10 years 7 years 3 years Argentina Regional Argentina Peru Brazil Brazil 2008 2008 2008 2008 2008 2007 Instituto Costarricense de SABESP ATE III Bicbanco Peru LNG Linha 4 - Amarela Electricidad US$ 400,000,0000 US$ 150,000,0000 US$ 240,000,0000 US$ 110,000,0000 US$ 80,000,0000 US$ 210,000,0000 B Loan B Loan B Loan B Loan B1 Loan B Loan Construction + 12 years $100 M 12 yr / $50 M 10 yr 12 years 12 years 3 years 10 years Costa Rica Peru Brazil Brazil Brazil Brazil 2007 2007 2007 2007 2007 2006 Charrua-Temuco Delba Vessel Telefonica Moviles Colombia Celtins Embratel BBVA Banco Continental Transmission Line US$ 375,278,689 US$ 475,000,0000 US$ 20,000,0000 US$ 220,000,000 US$ 105,000,000 US$ 35,278,000 B Loan B Loan B Loan B Loan B Loan B Loan 10 years 5 years 6 years 5 years 5 years 20 years Brazil Colombia Brazil Brazil Peru Chile 2006 2006 2006 2006 ATE II Celpa Investment Cemat Investment Program Crecera Finance Program Company US$ 11,754,000 US$ 29,500,0000 B Loan US$ 60,000,0000 B Loan US$ 90,000,0000 12 years B Loan 6 years B Loan 6 years 4 years Brazil Brazil Brazil Regional

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