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INTER-AMERICAN DEVELOPMENT BANK
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 SchulzPrivate Sector Department
March 2007
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Inter-American Development Bank (IDB)Inter-American Development Bank (IDB)
Private Sector DepartmentPrivate 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$100 million and above
Regional multilateral institution with 47 member countries dedicated to accelerate economic & social development in Latin America and the Caribbean
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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IDB’s Competitive AdvantagesIDB’s Competitive Advantages
Deep Knowledge and Excellent Relations with Latin America and the Caribbean Oldest and largest multilateral lender to Latin America and the Caribbean : US$ 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
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Recent Strategic ChangesRecent Strategic Changes
US$200 MILLION PER PROJECT*** / 50% OF
PROJECT COST
FINANCING AND GUARANTEES ALSO IN LOCAL CURRENCIES
PRIVATELY OR STATE-OWNED CORPORATE
ENTITIES AND FINANCIAL INSTITUTIONS**
ALL ECONOMIC SECTORS, MORE FLEXIBLE USE OF
PROCEEDS*
IDB participation limited to US$75 Million /
25% of Project Cost
All Transactions in US$
Privately Owned Entities
Infrastructure, Captial Markets Operations, Trade
Finance
2005
Limits
Currency
Eligible Clients
Eligible Sectors
2007
* Exceptions: negative exclusion list** Without Sovereign Guarantee*** Up to US$400 Million in Exceptional Cases
MORE EFFICIENT, FASTER PROCESSES, ADAPTED TO
MARKET NEEDS
Time-consuming internal Approval Processes
Turnover times
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Lending ProductsLending Products
A/B Loans
“A” – IDB Loan Tranche
“B” – Participation of Market Players (international banks and Institutional Investors)
IDB is Lender of Record
Project Finance
Warehousing lines
Revolving credit lines
Refinancing
Senior and subordinated Loans
Tenors: up to 30 years (average: 10-15 years)
Financing in local currencies (depending on market conditions for swaps)
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Guarantee ProductsGuarantee ProductsCharacteristics:
Partial Credit Guarantees (covering all risks – up to 50%; up to 100% within RTFFP) or Political Risk Guarantees
Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale)
Guarantee amount can vary or stay constant over the tenor (up to 30 years), also amortizing securities
Guarantee capped in US$ - 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)
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Financial Markets: Products and ServicesFinancial Markets: Products and Services
Structured Finance (e.g. securitizations)
Bond issues
Investment funds
Regional Trade Finance Facilitation Program (TFFP)
Trade finance facilities (TFFs)
Structured trade finance
Capital MarketsCapital Markets Trade FinanceTrade Finance Financial Institutions(new mandate)
Financial Institutions(new mandate)
General Purpose: Lending facilities
Subordinated debt (Tier II)
Partial Credit Guarantees
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Trade Finance: Trade Finance Facilitation ProgramTrade Finance: Trade Finance Facilitation Program
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
(i) Letters of Credit(ii) Export and import financing funded by Confirming Banks(iii) International Guarantees (Bid, Performance, Advance Payment Bonds) and Stand-by
Letters of Credit
Eligible Transactions
Up to 100% per individual transactionCoverage Level
Up to 3 yearsTenor
(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
Program Characteristics
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Operational GuidelinesOperational Guidelines
Project CostsDefined 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$200mn
Currency USD, Euro, Yen, local currency subject to market conditions
Maturity Up to 30 years
Pricing Market-based
Fees Applied as appropriate to each project
Expenses Due diligence
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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225
346.8311.2
174
273.9
573
605.2
458
282.5
919.8
316.4 333.9
683
456.5
2002 2003 2004 2005 2006
Infrastructure (A-Loans plus Guarantees)
Financial Markets (A-Loans plus Guarantees)
Total (A-Loans plus Guarantees)
Portfolio – Approved ProjectsPortfolio – Approved Projects (in US$ million)(in US$ million)
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Portfolio – Projects by SectorsPortfolio – Projects by Sectors (as of March 2007)(as of March 2007)
US$ 1,810.3m
GuaranteesB-LoansA-Loans
US$ 3,699.2mUS$ 3,219.5m
Water3.2%
Investment Funds3.8%
Capital Markets8.2%
Transportation9.6%
Trade Finance22%
Communications3.2%
Financial Institutions
2.4%
Energy47.5%
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Financial Markets - TransactionsFinancial 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
PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK
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Infrastructure: Award-winning DealsInfrastructure: Award-winning Deals
Energy ATE II - 937 Km Power Transmission
Line in Brazil Campos Novos - 880 MW hydro-
power plant in Brazil Novatrans - 1,278 kilometer power
transmission line in Brazil TermoPernambuco - 520 MW thermal
power plant in Brazil Termobahia - 190 MW thermal power
in Brazil Bajio Energy - 600 MW combined
cycle plant in Mexico Light Energy Services - CAPEX
program for a power distribution company in Brazil
Termoelectrica del Golfo - 230 MW thermal power plant in Mexico
Aguaytia - 240 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 - 109.6 kilometer toll
road in Chile Yucatán Gas Pipeline - 694 Km. Gas
pipeline in Mexico
Water & Sanitation Antofagasta - Seawater desalination plant
in Chile Rio Bogotá - Water treatment facility in
Colombia
Contact Information
Hans Schulz
Head of Financial Markets
Private Sector Department
Inter-American Development Bank
1300 New York Avenue, N.W.
Washington, DC 20577 – USA
Tel: (1) 202.623.3702
Fax: (1) 202.623.3319
http://www.iadb.org/pri/