Mumbai, India, February 5, 2001 -- As
part of its efforts to be more responsive to client needs and extend credit
in local currency, the International Finance Corporation has launched its
first structured partial credit guarantee on a local currency bond issue.
The partial guarantee is for a 1.5 Billion Indian Rupees (about US$32
million equivalent), 10 year bond issued by Ballarpur Industries Ltd (BILT).
Nina Shapiro, IFC Treasurer, said that long-term local currency funds for
non-AAA corporations are often not available in the capital or bank markets
of developing market countries and this new product addresses that need.
She added that IFC plans to offer partial credit guarantees on a
global basis to other clients in the emerging markets for bond and loan
For this issue, IFC is guaranteeing two debt service payments on a rolling
basis during the first four and a half years, and all debt service payments
for the remaining five and a half years. CRISIL, the Indian affiliate
of Standard & Poors, has rated the debt issue AA+, a four notch upgrade
from BILT’s stand alone rating of single-A.
By offering a partial guarantee, rather than a full guarantee, IFC is able
to mobilize additional funds by having investors invest in debentures in
excess of IFC’s guaranteed amount. This co-financing between IFC
and the Indian capital markets not only allows BILT to raise funds in excess
of IFC credit being extended but allows BILT access to long-term funds
to properly manage their assets and liabilities. BILT, the largest
producer of writing and printing paper in India, will use the debt issue
proceeds to finance their $126.1 million modernization and expansion program.
Mr. Bernard Pasquier, IFC director for South Asia, said the investment
will establish a benchmark in the Indian domestic capital markets for a
high quality, long maturity corporate asset that has the potential for
secondary trading. He added that the investment will create a strong
internationally competitive Indian paper company that can provide a steady
stream of business to local wood pulp producers, reflecting IFC’s development
strategy of poverty reduction in rural areas.
The mission of IFC, part of the World Bank Group, is to promote private
sector investment in developing countries, which will reduce poverty and
improve people's lives. IFC finances private sector investments in
the developing world, mobilizes capital in the international financial
markets, and provides technical assistance and advice to governments and