Press Releases

IFC Supports First Local Bond Issue by Private University in Peru

Ludi Joseph
Phone: (202) 473-7700


Washington D.C., Aug. 3, 2005 —To develop domestic capital markets and expand local financing options for educational institutions, the International Finance Corporation—the private sector arm of the World Bank Group—supported Peru’s Universidad de San Martin de Porres in the first bond issue by a private university in the country.

USMP issued the first $15 million tranche of its $30 million seven-year bond program. The bond is secured by future tuition receipts of six USMP faculties and backed by a 30 percent partial guarantee from IFC. IFC's credit enhancement, together with the trust mechanism, allowed the bond to achieve a AA+ rating by local agencies Apoyo, an affiliate of
Fitch, and Pacific Credit Rating. The bond was 1.5 times oversubscribed and offered a yield of Libor plus 3 percent, lower than the Libor plus 5.5 percent five-year funding previously available to the university. It was purchased by domestic institutional and retail investors. The structuring agent was BBVA/ Banco Continental.  

Guy Ellena, director of IFC’s Health and Education Department, noted, “IFC welcomes the opportunity to help USMP raise long-term financing on the local capital market. We expect the transaction to demonstrate to other universities a viable means of funding. This bond is the second capital markets transaction for a higher education project undertaken by IFC after Chile’s Universidad Diego Portales in 2003, and we hope to continue building on this experience in other parts of the world.”

Peru’s capital markets are currently characterized by concentrated portfolios of institutional investors due to a lack of issuers with sufficiently high ratings.

Lee Meddin, IFC deputy treasurer, said, "This instrument provides an alternative high-quality long-term asset for local institutional investors and allows them to diversify their holdings into a new sector.  Following the issuance of IFC’s two ‘Inca’ bonds on the Lima market and of the IFC-enhanced bond by Drokasa last month, we expect to be able to provide similar support to a number of Peruvian issuers."

Jose Antonio Chang, rector of USMP, said, “This bond issue is an innovative way for our university to raise capital for its development plans. It will build USMP’s investor base and diversify funding sources.  The proceeds will finance our expansion and modernization program and go toward restructuring outstanding obligations.”

Founded in 1962, USMP is Peru’s largest private university, offering undergraduate and graduate degree programs in 19 disciplines. It is organized in nine faculties and operates at 14 non-residential campuses across Lima. USMP has positioned itself as the only private university to target the lower- and middle- income segments of the student market and currently provides education to more than 30,000 students.

IFC's mission
( is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives.  IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of end of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.