WASHINGTON, D.C., December 17, 2004
— The International Finance Corporation, the private sector arm of
the World Bank Group, has invested $7.1 million to support the issue and
placement of $63.5 million in mortgage-backed securities by the Baltic-American
Enterprise Fund (BaLAEF). These are secured by mortgage loans originated
in Latvia by the company’s mortgage program.
The transaction is the first securitization in Latvia, and the first residential
mortgage-backed securitization ever to be issued in Central and Eastern
Europe. IFC has actively participated in structuring the transaction and
has also supported the issue by investing $2.1 million in the subordinated
(Class B) certificates. The issuance of the B certificates provided credit
support to the $60.5 million senior (Class A) certificates; the A certificates,
rated Aa2 by Moody’s Investor Services, were placed with institutional
investors in Europe and the United States. IFC also supported this issuance
by purchasing $5 million of the senior notes.
The issuance is backed by a pool of dollar-denominated residential mortgages
in Latvia. BaLAEF will use the proceeds of the transaction to originate
new mortgage loans in the Baltics, helping the company achieve its growth
plans and increasing the availability of funding for the housing finance
in the region.
IFC was instrumental in supporting the company’s plans for this international
issuance when it provided BaLAEF with a $50 million warehousing line in
early 2003, helping expand its mortgage lending operations and prepare
for secondary mortgage market activities.
Nina Shapiro, IFC’s Vice President, Finance and Treasurer, said, “This
securitization is another example of IFC's growing structured finance efforts
to develop the mortgage, banking and capital markets in transition countries.
We are pleased to help BaLAEF introduce this new asset type.” Lee Meddin,
Deputy Treasurer and Global head of Structured Finance at IFC added, “this
transaction will be a benchmark for using innovative structures and best
practice to help companies in emerging countries efficiently access funding
from international capital markets.”
Jyrki Koskelo, Director of IFC’s Global Financial Markets Group, noted,
“The transaction fits with IFC’s efforts to help establish and develop
private secondary mortgage market companies. It also helps channel
long-term financing from international investors in mortgage-backed securities
to home mortgage borrowers, most of whom are middle- and lower-income families.”
Edward Nassim, Director of IFC’s Central and Eastern European Department,
said, “The project is part of IFC's work to develop and modernize the
housing finance sector in the region, through investments in transactions
that can provide a model to other investors.”
Richard Sheridan, CEO of BaLAEF, said, "We are pleased to be working
with IFC on this innovative transaction. In addition to providing credit
enhancement necessary to support the securities issue, IFC has helped BaLAEF
conceptualize and structure the transaction. We look forward to continuing
to work together to bring new instruments to the region.”
The mission of IFC (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 through FY04, 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 FY04 was $17.9 billion for its own account and $5.5 billion held
for participants in loan syndications.