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) €œEl 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. €œAlthough 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 €œEl 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: €œThis €œEl
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.
€œA 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: €œIFC 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.
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