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IFC UNVEILS NEW FINANCING MECHANISM FOR EMERGING MARKETS IN MEXICO -- U.S. Insurance Companies Purchase 12-Year Corporate Debt Securities


Mauricio Perea
Phone: (202) 473-7997
Fax: (202) 676-0365
Jeffrey Hooke
Phone: (202) 473-5284


WASHINGTON, D.C., July 24 -- The International Finance Corporation (IFC) has signed a US$100 million, 12-year debt financing agreement with Apasco, S.A. de C.V., a Mexican cement producer, through which the company will issue the first long-term corporate debt securities since the Mexican peso devaluation of last December. The project features a unique financing mechanism developed by IFC to bring new sources of long-term investment capital -- primarily from insurance companies and pension funds -- to emerging market companies. It is the first time an IFC co-financing arrangement for a single company has received a credit rating from a major rating agency. "This transaction represents a significant step in IFC's support for the Mexican private sector," according to Mr. Helmut Paul, Director of IFC's Latin America and the Caribbean Department. "The willingness of U.S. institutional investors to purchase securities with a 12-year maturity is a major vote of confidence in Mexico," he added. Prior to the peso cri
sis, Mexican corporations regarded as good credit risks typically obtained debt financing of 3-5 years from the Euromarkets. Since the crisis, even good-quality companies have had difficulty issuing debt with maturities longer than six months. To make long-term funding available for Apasco, IFC developed an innovative financing structure to access the U.S. institutional private placement debt market. IFC is extending a US$100 million loan to Apasco, of which US$15 million is for its own account and US$85 million consists of a participation interest sold by IFC to a special purpose business trust based in Wilmington, Delaware. (More) Press Release No. 96/07, page 2 of 2 The special purpose trust subsequently issued US$85 million of 12-year Asset-Backed Certificates, which were rated as investment-grade and then sold as a private placement to four major U.S. life insurance companies. Swiss Bank Corporation and Banamex acted as placement agents for the sale. "The unusually long maturity for Apasco, and the inves

tment-grade rating obtained for the securities, are significant achievements," according to Mr. Paul. "This special trust structure provides a new solution to the growing demand for long-term capital in emerging markets. IFC will be able to mobilize more financing for private infrastructure projects and basic industries, which need the extended maturities realized in this transaction. IFC expects to duplicate this structure with other companies, both elsewhere in Latin America and throughout the developing world," he added.