Washington D.C., April 7, 2003—The International
Finance Corporation, the private sector arm of the World Bank Group, has
agreed to provide its first partial guarantee of a local bond issuance
in Chile. IFC’s credit enhancement will facilitate the *UF 1 million
(approximately US$22 million) bond issuance of Universidad Diego Portales
(UDP), one of Chile’s leading private universities.
The transaction is expected to be the first future cash flow securitization
in Chile and the first by a Latin American university. The partial
guarantee offered by IFC is part of a broader strategy to help develop
domestic capital markets and to expand the local currency financing options
available to educational institutions.
IFC will provide a guarantee for up to 30% of the principal amount of the
bonds outstanding (up to UF 300,000, approximately US$6.6 million, at issuance).
With the IFC credit enhancement, the eight year bonds have received
a AA- rating by the local affiliates of Moody’s, Standard & Poors
The bond was structured with Ernst & Young’s Corporate Finance Division
using future tuition cash flows of some elected careers as an underlying
asset. This product was developed mainly to attract Chilean institutional
investors like pension Fund Administrators (AFPs), insurance companies,
and others. The bonds will be issued on behalf of UDP by ABN Amro
Securitizadora. UDP was represented by the law firm of Carey y Cia.
Nina Shapiro, IFC Vice President of Finance and Treasurer, said, “This
instrument will provide an option for local institutional investors to
diversify their holdings. We expect to do other such capital market transactions
in Chile.” She added, “This type of innovative form of IFC financing
is good for our clients and also helps to develop domestic capital markets.”
The University will use the proceeds of the bonds to finance an expansion
and modernization project. The University’s aim is consolidate its
market position and provide additional space needed to accommodate increased
student enrollment in recently launched programs in medicine, engineering,
and the humanities. UDP is working closely with the Municipality
of Santiago to create a fully integrated urban campus with stronger links
to the community and neighboring universities. The project includes
the restoration and renovation of several historic buildings, which will
help preserve the rich cultural heritage of the district.
"IFC has welcomed the opportunity to help Diego Portales raise long-term
local currency financing for its diversification and expansion. This structured
bond is the first capital markets transaction for a higher education project
undertaken by IFC, and we hope to replicate its success in other parts
of the world,” noted Guy Ellena, Director of IFC's Health and Education
Since founded in 1982 and becoming independent in 1993, the Universidad
Diego Portales has been a private law endowment for higher education, cultivating
freedom of thought, opinion and education. The University is located in
Chile's capital city Santiago, and its student body totals approximately
10,000 students from different cities throughout Chile and 27 countries
around the globe.
IFC's mission (www.ifc.org) 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.
IFC’s current portfolio in Chile is US1.2 billion Since its founding in
1956, IFC has committed more than $34 billion of its own funds and arranged
$21 billion in syndications for 2,825 companies in 140 developing countries.
IFC’s committed portfolio at the end of FY02 was $15.1 billion.
* UF is the inflation adjusted peso index