RISK MITIGATION: What are Updates & Proposals on Risk Mitigation Products?

Product Name A/B Loans
Link to Product Website
Provider Name IADB (Inter-American Development Bank Group)
Product Definition The IDB provides a variety of financial products and works with clients to establish a wide assortment of secured instruments in dollars and local currencies. The Bank partners with commercial banks, institutional investors and other lenders to finance loans for corporations, banks, as well as public and mixed capital entities via the A/B loan program or other co-financing arrangements.

A/B Loans

The IDB attracts banks and institutional investors as co-financiers through its A/B loan program. Under this program, the IDB offers the A portion of the loan from its own resources. The Bank partners with other financial institutions to provide the B loan.

Under the structure, the IDB is the Lender of Record in the transaction and acts as Lead Lender and Administrative Agent for the entire A plus B loan facility. Such structure offers benefits for both the borrowers and the financial institutions partnering with the Bank because it reduces the risk of the operation.

The IDB enjoys a special relationship with its borrowing governments: de jure immunity from taxation and de facto preferred creditor status. Therefore, no withholding taxes apply to debt service payments on IDB loans. As a result, financial institutions participating as B Lenders benefit from the same status. For borrowers, this reduced risk translates into lower borrowing costs.

Bank regulators from many European and other non-regional member countries recognize the special status of the IDB Group and exempt participants in B loans from compulsory country-risk provisions. The Basel II accord also recognizes that B loans contribute to mitigate or transfer convertibility risks.

Characteristics of A/B loans and syndications:

1) No sovereign guarantee

2) Loan made up of two tranches:: A loan is provided by the IDB (lender of record) and the B loan is provided by international banks/institutional investors through syndication

3) The program supports: project finance, warehousing lines, revolving credit lines, refinancing, and senior & subordinated loans

4) Are financed in LC (after meeting LCF conditions and subject to market conditions).

5) LIBOR rate: LIBOR + 50-350 bps (customized, market priced) plus credit spread.

6) Tenor: Up to 30 years (average: 10-15 years)

Product Type Co-financing
Defined Risks Covered n.a.
Eligible Form of Investments Bank Loans
Non-Bank Loans
Shareholder Loans
Eligible Currency of Underlying Investment Covered by this Product Both local and foreign currency
Eligible Countries & Regions n.a.
More on Eligible Countries
Eligible Applicants MIXED (PUBLIC-PRIVATE): Private Joint Ventures (51% or more private-owned)
PRIVATE: All
More on Eligible Applicants
Eligible Sector No Specific Sector
Maximum Tenor Over 20+ years
Max. Absolute Amount (USD) Over 350+ MM
Max. % of Project Costs Covered 25+% to 50%
Max. % of Export Content Covered Max./under 50%
Fees Market-based
n.a.

Other Conditions Sovereign Counterguarantee: No
Anti-Corruption and Governance Standards: No
Environmental standards: Yes link
Social standards (incl. Human Rights Standards; Labor Rights Standards): Yes link
Others: http://www.iadb.org/en/about-us/our-objectives-goals-and-sector-priorities,7914.html?#protection of the environment, response to climate change, promotion of renewable energy and ensuring food security
Source(s) n.a.
For more information, contact
IADB (Inter-American Development Bank)
Phone: (202) 623-1000
Attachments n.a.
Additional Links n.a.
Deals n.a.

Provider Name IADB (Inter-American Development Bank Group)
Institution Type PUBLIC: Multilateral Development Bank
Ownership Owned by 47 member countries
Head Office IDB Headquarters 1300 New York Avenue, N.W. Washington, D.C. 20577, USA
Provider Home Country United States
Rating n.a.
Main Risk Mitigation Products Loans
Grants
Guarantees
Equity Investments
Technical Cooperation
Financing Solutions
Attachments n.a.
Additional Links www.iadb.org/en/projects/projects,1229.html
www.iadb.org/en/publications/publications,4126.html
www.iadb.org/en/news/news,2359.html
www.iadb.org/en/research-and-data/research-data,1612.html
Entered On: 12/18/2007 at 09:57 AM
Updated On: 05/21/2013 at 08:43 AM