Washington DC. November 13, 2001—The
International Finance Corporation (IFC), the private sector arm of the
World Bank Group, has issued a partial guarantee on a local currency bond
issue in Russia, as part of its efforts to be more responsive to client
needs, extend credit in local currency and develop local financial markets.
The partial guarantee is for 300 million Russian Rubles (about US$10 million
equivalent) on 500 million of Rubles bonds with a final maturity of 3 years
launched by the Russian Standard Bank (RSB). The issue is being managed
by Troika Dialogue, a Moscow-based investment bank, and the bonds will
be listed on the Moscow Interbank Currency Exchange.
RSB is developing a substantial retail lending operation in Moscow and
in the regions. In order to fund this expansion it is strategically
important for the Bank to establish itself in the domestic capital markets
to access sources of longer-term local currency financing.
By offering a partial guarantee, rather than a full guarantee, IFC will
be able to mobilize additional funds by having investors purchase bonds
in excess of IFC’s guaranteed amount. IFC’s support will provide
the credit enhancement necessary to allow RSB to tap the markets initially,
but will also enhance its ability to access debt markets on its own. This
way, investors will be comfortable taking a portion of RSB credit risk
under the partial guarantee structure.
Nina Shapiro, IFC Treasurer, said that longer-term local currency funds
for non-AAA corporations are not usually available in the capital or bank
markets of developing countries and this new product addresses that need.
She added that IFC is planning to offer partial credit guarantees
on a global basis to other clients in the emerging markets for bond and
Edward Nassim, IFC director for Central and Eastern Europe, said this investment
create a standard in the Russian domestic capital markets for high quality
banking debt paper that has the potential for secondary trading. He
added that it will provide an instrument for local currency funding , where
other sources, such as deposits, are limited and of very short term.
The RSB guarantee is IFC’s third investment in the financial sector in
Russia in the fiscal year 2002. To date, IFC’s held portfolio in
Russia, including amounts mobilized from commercial banks, is approximately
$264 million. IFC’s program for Russia continues to be active with investments
in projects of about $60 million for the financial year.
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, IFC has 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.