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IFC Launches El Dorado Bond Market in Colombia


Adriana Gomez
Phone:  (202) 458-5204

Fax:  (202) 974-4384

E-mail:  
agomez@ifc.org


Washington, D.C., March 21, 2002—The International Finance Corporation (IFC), the private sector arm of the World Bank Group, today launched a domestic Colombian peso (COP) “El Dorado” bond issue for the amount of COP 225 billion (approximately US$100 million equivalent).  IFC is the first international institution to issue a Colombian peso bond.  This transaction will thus provide a benchmark for future high-grade issuers and serve to deepen the Colombian capital markets.  It also represents the inaugural Latin American currency bond issue for IFC.

The five-year domestic bonds carry a 13.70% coupon and were priced around 50 basis points through domestic government debt (TES 2006).  The arranger of the transaction is BNP Paribas, the lead manager is the Corporacion Financiera Nacional y Suramericana. (Corfinsura) and the syndicate comprises of a wide group of premier Colombian institutions.  The proceeds of the issue were swapped into floating rate US dollar funds.  The end-benificiary of the swap is a Colombian entity, which was able to hedge its foreign currency liabilities.


In the last couple of months, IFC has been working closely with the Colombian authorities to prepare for this transaction.  “Although the political situation in Colombia has been rather volatile in the last month, we are very pleased that we have been able to launch this transaction successfully.  The issue was more than twice oversubscribed and achieved broad distribution with more than 40 local investors, including the large domestic pension funds” said John Groesbeek, Senior Financial Officer at IFC.


By launching this “El Dorado” bond issue, IFC is showing its continued support to the Republic of Colombia.  A developed local bond market can provide long-term, local currency, fixed rate funding and ease the risky reliance on foreign currency funding.  Nina Shapiro, IFC’s Treasurer, said: “This “El Dorado” issue represents IFC’s commitment to help client countries develop their domestic markets and the critical access to local currency and longer term fixed rate funding.  We have confidence in the capacity of Colombia’s financial institutions and investors to support the further development of the market and we expect other local and international borrowers to follow our initiative.  IFC intends to continue its loan and equity investments in Colombia, and will also provide more local currency instruments through partial credit guarantees and risk hedging intermediation.”


IFC has been providing technical assistance to the government and the private sector in Colombia, to help shape a more efficient capital market and to develop a more efficient regulatory framework.  The Colombian pension fund system is now highly developed and the former three regional bourses have now been consolidated into a single exchange in Bogotá, providing greater transparency and boosted volume.  A stronger and effective capital market will also support Colombia’s efforts to develop a corporate governance culture which will enhance investor confidence.


A sound financial market will support Colombia’s efforts to attain its economic goals” said Bernard Pasquier, IFC’s director of the Latin America and Caribbean department.  Mr. Pasquier added: “IFC supports the development of strong capital markets in Latin America to bring benefits for economic growth, and to help reduce the vulnerability of the region’s financial systems to external shocks.  Effects of the 1990’s banking crisis on Latin American economies would have been less serious had capital markets in the region been broader and deeper.”


IFC funds its lending activities by issuing bonds in the international capital markets.  The Corporation’s securities, which are rated Aaa by Moody’s and AAA by S&P, have been issued in 28 different currencies.  IFC’s funding program for fiscal year 2002 is around US$3.5 billion.  IFC has been the first, or among the first, nonresidents to issue in many currencies including Spanish pesetas, Portuguese escudos, Greek drachmae, Hong Kong dollars and Singapore dollars in the domestic markets, and in Czech koruna, Polish zloty and Israeli shekel in the eurobond markets.


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.