Washington D.C., Aug. 3, 2005 —To develop
domestic capital markets and expand local financing options for educational
institutions, the International Finance Corporation—the private sector
arm of the World Bank Group—supported Peru’s Universidad de San Martin
de Porres in the first bond issue by a private university in the country.
USMP issued the first $15 million tranche of its $30 million seven-year
bond program. The bond is secured by future tuition receipts of six USMP
faculties and backed by a 30 percent partial guarantee from IFC. IFC's
credit enhancement, together with the trust mechanism, allowed the bond
to achieve a AA+ rating by local agencies Apoyo, an affiliate of
Fitch, and Pacific Credit Rating. The
bond was 1.5 times oversubscribed and offered a yield of Libor plus 3 percent,
lower than the Libor plus 5.5 percent five-year funding previously available
to the university. It was purchased by domestic institutional and retail
investors. The structuring agent was BBVA/ Banco Continental.
Guy Ellena, director of IFC’s Health and Education Department, noted,
“IFC welcomes the opportunity to help USMP raise long-term financing on
the local capital market. We expect the transaction to demonstrate to other
universities a viable means of funding. This bond is the second capital
markets transaction for a higher education project undertaken by IFC after
Chile’s Universidad Diego Portales in 2003, and we hope to continue building
on this experience in other parts of the world.”
Peru’s capital markets are currently characterized by concentrated portfolios
of institutional investors due to a lack of issuers with sufficiently high
ratings.
Lee Meddin, IFC deputy treasurer, said, "This instrument provides
an alternative high-quality long-term asset for local institutional investors
and allows them to diversify their holdings into a new sector. Following
the issuance of IFC’s two ‘Inca’ bonds on the Lima market and of the
IFC-enhanced bond by Drokasa last month, we expect to be able to provide
similar support to a number of Peruvian issuers."
Jose Antonio Chang, rector of USMP, said, “This bond issue is an innovative
way for our university to raise capital for its development plans. It will
build USMP’s investor base and diversify funding sources. The proceeds
will finance our expansion and modernization program and go toward restructuring
outstanding obligations.”
Founded in 1962, USMP is Peru’s largest private university, offering undergraduate
and graduate degree programs in 19 disciplines. It is organized in nine
faculties and operates at 14 non-residential campuses across Lima. USMP
has positioned itself as the only private university to target the lower-
and middle- income segments of the student market and currently provides
education to more than 30,000 students.
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, helps clients improve social and environmental
sustainability, and provides technical assistance and advice to governments
and businesses. From its founding in 1956, 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 end of FY04 was $17.9 billion for its own account and $5.5
billion held for participants in loan syndications.