LEADING-EDGE TRANSACTIONS: What are Leading-Edge Transactions for Possible Replication?

Entered On:08/15/2007 at 04:59 PM
Updated On:05/03/2013 at 06:15 PM
Year of Financial Closure:2001
Host Country:El Salvador
Project Majority Ownership:private
Innovative Aspects:In the AES CAESS Transaction, a monoline insurer (MBIA) had shared for the first time risk with a multilateral development bank (IFC) on a pari passu basis. The monoline insurer covered that part of the deal (the privatization costs AES had to pay) which IFC at that time was not able to cover due to its charter.

The IFC project profile on the AES CAESS Transaction describes the overall IFC contribution to the project:
“The total project cost is approximately US$110 to US$140 million. The proposed IFC investment includes an A Loan of up to US$45 million for IFC's own account and a B Loan of up to US$65 to US$75 million for the account of participating banks.”

The attached Credit Suisse Prospectus prepared for an issue of US $300 million 6.75% Senior Guaranteed Notes due 2016 under the AES El Salvador Trust provides details on the joint IFC MBIA deal and the related AES El Salvador Trust:

"In December 2001, CAESS, EEO and DEUSEM jointly entered into a loan agreement with International Finance Corporation (IFC) in an amount up to US $120 million. This loan is payable through two quotas, the IFC quota A, with interest at LIBOR plus 3.875%, payable in 22 semi-annual installments of principal and interest, due in December 2014, and IFC quota B, with interest at LIBOR plus 3.5%, payable in 16 semi-annual installments of principal and interests, due in December 2011.
CAESS entered a note with Fortis Bank (Fortis) in the amount of US $120 million with an unconditional and irrevocable guarantee by MBIA Insurance Corporation (MBIA) pursuant the terms of the insurance policy. If MBIA makes any such payment, MBIA would have a claim against CAESS and EEO under the Insurance and Reimbursement Agreement. Both CAESS and EEO are jointly responsible for the payment of the debt, which is collateralized by certain assets owned by CAESS and EEO. The Fortis notes bear interest rates at a fixed rate of 6.41%, and are payable in 16 semi-annual installments due in December 2011. Other borrowings are at floating rates, thus exposing the Company to cash flow interest rate risk. In accordance with the IFC loan agreement, the Company maintains a reserve account for the repayment in a restricted account. As of December 31, 2004, 2003 and 2002, the balance was $8.9, $8.7 and $3.6 million respectively, and it is included in non-current assets in the balance sheet, and EEO as co-borrower maintains a reserve account as well. In addition, the Company has an overdraft line of credit of up to $6 million with Banco Salvadoreño S.A., which guarantees the payment of its energy purchases in the electricity wholesaler market.

The AES El Salvador Trust is a Panamanian trust set up to finance the reorganization of the distribution companies CAESS, CLESA and EEO as direct subsidiaries of a newly-formed common holding company (AES El Salvador, S.A. de C.V.) which is the Trust’s settlor. "

Source: Credit Suisse First Boston. Offering Circular: AES El Salvador Trust. 2006.

Documents: El Salvador - CAESS EEO DEUSEM - IFC (2001).doc
El Salvador - AES CAESS Prospectus - CSFB (2006).pdf
El Salvador - AES Trust - Fitch (2006).pdf