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| B.Continental II (Facility) |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 26661 |
| Company name | Banco Continental S.A. |
| Country | Peru |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Pend FAP |
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| Date SPI disclosed | February 21, 2008 |
| Projected board date | March 31, 2008 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The project aims to put in place a comprehensive relationship package with Banco Continental S.A. (the Bank, BBVA or Continental), which is expected to:
- Support the Bank’s mortgage operations by making available a stand by facility of up to $40 million;
- Help mobilize funding for the Bank’s portfolio growth by providing a credit enhancement facility of up to $15 million for a non-recourse auto loan securitization; and
- Support the Bank’s sub-national finance activities by providing a municipal finance guarantee facility of up to $25 million, whereby IFC would guarantee municipal loan originated by Continental. |
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| Project sponsor and major shareholders of project company |
Continental is the second largest commercial bank in Peru with over $8.3 billion in assets and $663 million in equity. Continental operates as a universal bank, with an important presence in most market segments. As of December 2007, Continental held 26.3% market share and had a loan portfolio over $5.7 billion. The Bank is locally rated AAA.pe by Apoyo & Asociados, a local affiliate of Fitch Ratings and has recently received an international investment grade rating of BBB- by S&P, which is one notch above Peru´s sovereign foreign currency debt.
Continental’s main shareholder is Holding Continental S.A. (92%), which is in turn jointly owned by BBVA Group (Spain) and Brescia Group (Peru). The remaining shares are owned by pension funds (4.3%) and individuals.
BBVA Group is one of the largest and oldest financial groups worldwide dating back to 1857. As of December 2007, BBVA has over $732.9 billion in assets and $40.8 billion in equity, with presence in more than 30 countries. BBVA is rated AA- by Fitch and Aa1 by Moody’s.
Brescia Group is one of the top corporate conglomerates in Peru, with investments across most economics sectors including: mining, banking, insurance, pension funds, real estate, tourism, explosives, welding, and fishing, among others |
| Total project cost and amount and nature of IFC's investment |
| The proposed IFC investment consists on a comprehensive financing package of up to $80 million for IFC’s own account. |
| Location of project and description of site |
| Continental is headquartered in Lima and has a branch network of 191 branches, of which 62 are located outside Lima. IFC’s investment can be used to fund loan activities through any of the branches. |
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| Anticipated development impact of the project |
The project is expected to have a strong developmental impact in the following areas:
- The liquidity facility will support Contiental’s growth plans on the housing finance business, thus expanding the availability of residential mortgages and enhancing home ownership, while stimulating demand for labor, materials and other supplies for the housing industry.
- The Credit Enhancement Facility will introduce a new asset class to the domestic bond market (i.e. auto loan securitization), thereby broadening the scope of investment alternatives for institutional investors and individuals, increasing access to finance and potentially reducing the cost of borrowing for borrowers.
- The subnational facility will help mobilize funding and/or sector expertise for municipal infrastructure projects by providing a viable long term funding alternative to municipalities. The facility will help accelerate investments in essential infrastructure at the local level and improve the quality of municipal services provided. |
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| IFC's expected development contribution |
IFC is expected to play an important role, as it will:
- Offer a substantial long-term stand-by facility, not otherwise easily available.
- Help match-fund Continental’s increasing mortgage portfolio
- Develop the local capital markets by helping introduce new asset back securities
- Provide IFC expertise and involvement with BBVA on joint appraisals to municipalities.
- Share the risk of municipal loans, thus helping municipalities obtain financing to address bottlenecks in the provision of basic services. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. As an existing client (Project No. 25360), the Bank has developed and implemented a social and environmental management system (SEMS) to ensure compliance with the Applicable Performance Requirements, which includes a combination of IFC FI Exclusion List and the Applicable National Social and Environmental Laws and Regulations. These requirements will continue to apply. Based on the Applicable Performance Requirements and the SEMS and capacity review, the bank is required to
- Continue to implement its SEMS, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements;
- Submit a periodic report to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
Mr. Ignacio de la Luz
Gerente General Adjunto
BBVA Banco Continental
Av. Republica de Panama 3055 – Piso 18
San Isidro
Lima 27, Peru |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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