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IFC Offers First Structured Partial Credit Guarantee for a Cross-Border Bond Issue


Adriana Gomez
Phone:  (202) 458-5204

Fax:  (202) 974-4384

E-mail:  
agomez@ifc.org

Lee Meddin

Chief Structured Finance Officer

Phone:  (202) 473 4300

E-mail:
 lmeddin@ifc.org


*Brazil’s Banco BBA-Creditanstalt will raise $50 million of Tier 2 capital

Washington DC, June 27, 2002—
The International Finance Corporation (IFC), the private sector development arm of the World Bank Group,  has launched its first structured partial credit guarantee on an international bond issue.  The partial guarantee is for a US$ 50 million, 10 year subordinated bond issued by Banco BBA-Creditanstalt S.A. (BBA), a leading wholesale bank in Brazil.


The bond issue, which has been structured so that the proceeds qualify as Tier 2 capital for BBA, benefits from a guarantee by IFC for four semi-annual interest payments on a rolling, reinstatable basis.  The bond received an investment grade rating from Moody’s of Baa3 and was placed by Merrill Lynch into accounts in the US, Europe, and Latin America.  The bond was priced significantly through the Brazil sovereign yield at issue; testimony to the strength of IFC’s guarantee and the positive credit fundamentals of BBA.


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.


Bernard Pasquier, IFC’s Director for Latin America and the Caribbean Department, noted that the current situation in Brazil has resulted in difficulties to access long-term financing.  “Given the importance of supporting the Brazil banking sector, IFC is pleased to have assisted one of our clients, BBA, in accessing the international markets for additional capital at this time”, Mr. Pasquier said.


Lee Meddin, Chief Structured Finance Officer at IFC, said: “IFC has been focusing on structuring products that increase both the capacity of the capital markets for emerging market credits and the access of clients to these markets.  The IFC credit support is structured to meet specific financing needs”. Mr. Meddin added: “In addition to special structures like this one for Tier 2 capital, IFC is gearing the partial credit guarantee product to domestic capital markets for long-term local currency funding,”


Nina Shapiro, IFC Treasurer, stressed:” Considering the importance of Tier 2 capital to the strength of the banking sector, IFC plans to offer the partial credit guarantee product to other banking clients on a global basis.  This can be used in raising capital in both the domestic and cross-border markets”, she said.


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, and provides technical assistance and advice to governments and businesses.

Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries.  IFC’s committed portfolio at the end of FY01 was $14.3 billion.

BBA-Subordinated Debt