*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.