IFC Syndications

1
IFC Syndications
2
Contents

• Overview of IFC
• IFCs Syndication Program
• Participation Agreement
• Portfolio Update
• IFCs Strategy and Pipeline

3
IFCs Purpose

• To promote open and competitive markets in
  developing countries
• To support companies and other private sector
  partners
• To generate productive jobs and deliver basic
  services
• To create opportunities for people to escape
  poverty and improve their lives

4
Defining Characteristics of IFC

• Participates primarily in private sector ventures
• Shares same risks as other investors
• Invests in equity
• Has market pricing policies
• Does not accept government guarantees
• Is profit-oriented

5
Services Offered by IFC

• Financial Products loans, equity, quasi-equity,
  guarantees, risk management products includes
  transactions in many local currencies
• Mobilization loan syndications, structured
  finance and parallel loans
• Advisory Services business enabling environment,
  access to finance, corporate advice,
  environmental and social sustainability, and
  infrastructure

6
IFCs Net Income and Net Worth
Net income (US millions)
Net worth (US billions)
3,000
20
18
2,500
16
14
2,000
12
Net Income US millions
Net Worth US billions
1,500
10
8
1,000
6
4
500
2
0
0
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
(Fiscal year-end is June 30)
7
IFC Financing in FY08
Total Commitments US16.2 billion
Syndications
IFC's own account
18
16
14
12
10
US billions
8
6
4
2
0
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
Includes US11.4 billion for IFCs own
account (loans, subordinated debt, equity other
products) and US4.8 billion raised
through mobilization Mobilization for
FY2006, 2007 2008 includes syndications,
structured finance products, and parallel loans
8
IFC InvestmentsFY2008 by Region
Total Commitments US11.4 billion
lt 1
12
14
East Asia the Pacific
11
Europe Central Asia
Latin America the Caribbean
24
Middle East North Africa
South Asia
13
Sub-Saharan Africa
Global
26
(Financing for IFCs own account, including
loans, equity, guarantees, risk management
products fiscal year-end is June 30)
9
IFC Investments FY2008 by Industry
Total Commitments US11.4 billion
lt1
7
3
10
12
40
21
3
3
(Financing for IFCs own account, including
loans, equity, guarantees, risk management
products fiscal year-end is June 30)
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Contents

• Overview of IFC
• IFCs Syndication Program
• Participation Agreement
• Portfolio Update
• IFCs Strategy and Pipeline

11
IFCs Finance Vice Presidency
Vice President Finance and Treasurer Nina Shapiro
Vice Presit Finance and Treasurer N
Funding Operations
Syndication and Resource Mobilization Ritva
Laukkanen
Liquid Asset Management
B Loan Management Matt Bauer
Syndications Stefania Berla
Derivative / Hedging Products
Structured and Securitized Products
London
Washington
Hong Kong
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B Loan Structure
Loan Agreement
Borrower
A B Loans
Participation Agreement

• One loan agreement IFC is lender of record and
  administers entire loan
• IFC fully shares project risks with participants
• Participation structure allows participants to
  benefit from IFCs privileges and immunities

B Loan
Participants
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B Loan Statistics
(Fiscal year-end is June 30)
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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

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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

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PCS Capital Treatment of B Loans under Basel II
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B Loan Benefits to Borrowers

• Enables loans with
• Longer tenors
• No withholding tax
• Completes financial package
• Introduces new banking relationships
• IFCs stamp of approval
• IFCs environmental and social leadership

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Top Reasons Borrowers Work with IFC
80
70
60
50
40
30
20
10
0
Long-Term Partner
Loan Maturity
Stamp of Approval
Product Pricing
Technical Expertise
Global Presence
Risk Mitigation
Environmental Social Expertise
Mobilization
(Percentages of IFCs clients who chose each
category as among their top four reasons for
working with IFC, based on results of 2008 IFC
Client Survey)
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B Loan Benefits to Participants

• Preferred Creditor Status (PCS)
• Recognition of IFCs risk mitigation by
• Regulators
• Rating agencies
• Basel II
• Private PRI providers
• IFCs environmental and social leadership
• IFCs structuring and restructuring skills

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Top 20 Participants
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The Value of Partnership From Lender of Last
Resort to Partner of Choice

• Developing long-term strategic partnerships
• IFC approaches banks at an early stage to
  cooperate on transactions and share arranger role
• Banks consider IFC as a preferred partner in
  helping clients in emerging markets

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Contents

• Overview of IFC
• IFCs Syndication Program
• Participation Agreement
• Portfolio Update
• IFCs Strategy and Pipeline

23
Participation Agreement

• Participants role in managing credit
• Information flow
• Liquidity
• Flexibility

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Participants Voting Rights

• 100 Change in money terms
• 100 Waive or amend conditions precedent
• 67 Acceleration by IFC 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)
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Information Sharing

• IFC shares with Participants all information we
  receive from Borrowers under the Loan Agreement
• This includes
• Regular financial reporting
• Knowledge of key credit events

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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,
  Moodys or SP
• Non-investment grade and unrated financial
  institutions may be considered on a case-by-case
  basis

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Flexibility

• Participants may obtain guarantees or political
  risk insurance (PRI) on a B Loan from an Eligible
  Financial Institution
• Combining B Loans with PRI
• Objective
• Enhance appeal of B Loans
• Increase ability to mobilize funds in
  challenging markets
• Solution
• Combine B Loans Preferred Creditor Status (PCS)
  with PRI
• Favorable capital treatment
• Contractual cover for specific risks
• PRI providers will enter new countries with
  more favorable terms

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Contents

• Overview of IFC
• IFCs Syndication Program
• Participation Agreement
• Portfolio Update
• IFCs Strategy and Pipeline

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B Loan Portfolio as of December 31, 2008 by
Region
Total Committed Portfolio US8.5 billion 165 B
Loans
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B Loan Portfolio as of December 31, 2008 by
Industry
Total Committed Portfolio US8.5 billion 165 B
Loans
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B Loan NPLs Declining Trend

• B Loan NPLs as Percentage of IFCs Total B Loan
  Portfolio
• NPLs at 1.6 as of December 31, 2008

Non-performing loans 90 days past due (Fiscal
year-end is June 30)
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Average B Loan Write-Offs1
Argentina crisis
Asia crisis
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
Assumes IFC A Loan write-offs are applied to B
Loans. Average calculated over last 10 fiscal
years. (Fiscal year-end is June 30)
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Contents

• Overview of IFC
• IFCs Syndication Program
• Participation Agreement
• Portfolio Update
• IFCs Strategy and Pipeline

34
IFCs Strategic Priorities

• Strengthen the focus on frontier markets
• Build long-term partnerships with emerging market
  players
• Address climate change and ensure environmental
  and social sustainability
• Promote private sector growth in infrastructure,
  health, and education
• Develop local financial markets

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IFC Financing

• IFC provides long-term funding for
• Project Finance
• Corporate Finance
• (includes refinancings, acquisitions and
  restructurings)
• Trade Finance

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Syndications Pipeline as of February 2009
46 upcoming mandated deals totaling US3.7 billion
1400
1200
Agribusiness
1000
Financial Markets
Manufacturing Services
800
US million
Health Education
600
Infrastructure
Oil, Gas, Mining Chemicals
400
Subnational Finance
200
0
Europe Central Asia
East South Asia
Latin America Caribbean
Middle East North Africa
Sub-Saharan Africa
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Selected Transactions in Asia
December 2006
US128,000,000 IFC B Loan
10 years Project Finance China
Mandated Lead Arranger
December 2008
US100,000,000 IFC B Loan
6.5 years Corporate Loan Indonesia
Mandated Lead Arranger
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Selected Transactions in EMEA
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Selected Transactions in Latin America
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IFC Syndications Contacts New Business
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IFC Syndications Contacts - Portfolio
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Feb 2009
September 2008
www.ifc.org/syndications