Washington D.C, June 26, 2003— The International
Finance Corporation (IFC), the private sector arm of the World Bank Group,
has approved an investment of up to $10 million in a public debt securities
offering by Exportadores II, an Argentine-domiciled financial trust
that will securitize pre-shipment export loans to a selected group of Argentine
companies. In total, it is anticipated that Exportadores II
will make $20-30 million of 270-day funding available to these exporters.
When completed, the Exportadores II transaction will be the second
public securities offering undertaken through the Exportadores Program,
an initiative that provides pre-shipment export financing to Argentine
companies. The Program was launched in late 2002 by HSBC Bank Argentina
S.A., BBVA Banco Frances S.A. and Banco Rio de La Plata S.A, three leading
Argentine banks, with a pilot financial trust that raised $15 million of
180-day funding for several, major Argentine exporters. As was the
case with this initial transaction under the Program, the same three arranging
banks will target domestic institutional investors, such as pension funds
and insurance companies, as principal investors for Exportadores II.
Due to improved economic conditions in Argentina over the last several
months, however, they will also market the Exportadores II investment
opportunity now to selected private banking clients, correspondent banks,
and international investors.
While the financial trust structure has been used previously in Argentina
to securitize other asset classes, it has not been traditionally applied
to trade finance transactions - which were normally funded in the bank
markets. Nonetheless, as a consequence of the country’s severe economic
crisis, credit lines to Argentina from international banks have been severely
reduced. This, in turn, has resulted in a shortage of conventional trade
finance offered by domestic banks to exporters.
In response to this situation, some Argentine financial intermediaries
have started to arrange capital markets transactions that access trade
finance funding from non-traditional sources, such as domestic pension
funds and other institutional investors. The Exportadores
Program, with its use of the financial trust structure, is one example
of this trend. In light of that, supporting further growth of the Program
- both in term of greater aggregate loan amounts, as well as longer tenors
made available to exporters - is a principal goal of IFC's participation
in the upcoming Exportadores II transaction. That, in turn,
should help make the structured trade finance alternative offered by the
Exportadores Program more widely accessible in the future to an
increasing number of Argentine companies, including SMEs.
Karl Voltaire, IFC's Director of Global Financial Markets, observed: "This
project signals to potential investors and lenders that multi-issuer, structured
trade finance transactions are feasible in Argentina, despite its still
evolving macroeconomic situation. As such, it complements IFC's current
strategy in Argentina of arranging single-issuer financings for sound,
export-oriented companies, of which there were already several examples
in 2002 and 2003."
Underlying export competitiveness in Argentina increased sharply in 2002,
as a result of Peso devaluation and lower-than-expected domestic inflation.
But lack of funding for exporters, as well as lower international prices
for their products, hindered growth in the US Dollar value of the country's
exports. Therefore, while physical volumes of Argentine exports remained
constant, their monetary value actually declined by 5%. With financing
constraints easing in the last few months, however, this trend has been
reversed, and exports rose 13.5% during the first four months of 2003 to
an annualized level of $26.7 billion.
Bernard Pasquier, IFC's Director for Latin America and the Caribbean, noted:
"As a result of cutbacks in conventional trade finance from
banks, Argentine exporters face difficulties in obtaining needed funding.
The IFC investment in Exportadores II will help to address
this situation, by supporting an innovative program that provides new sources
of funding to exporters, and thereby allows them to capitalize on improved
IFC’s investment will also promote further development of Argentina's
local capital markets by enlarging the supply of securitized trade finance
loans, a new asset class that is likely to become increasingly attractive
for domestic institutional investors, who have ample and growing liquidity.
Nina Shapiro, IFC's Vice President Finance and Treasurer, added: "The
loans that are to be securitized in Exportadores II are characterized
by relatively low credit risk, and the transaction's financial trust will
be structured to partially mitigate against several forms of cross-border
risk. Therefore, like the first financing under the Exportadores
Program, we hope that this transaction will elicit favorable interest from
local financial investors, who have faced a shortage of private sector
investment opportunities, as a result of the drought in Argentine capital
markets issuance activity since the onset of the country's crisis in late
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. From 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 with an
additional $6.5 billion held for participants in loan syndications.