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When IFC syndicates a loan it lends for its own account at the same time, also referred to as the IFC A loan. IFC is the sole contractual lender, acting on behalf of both itself and the B loan participants. Normally there is a single loan agreement between IFC and the borrower for the full amount of the financing to be provided by IFC and the participating institutions. It encompasses both the A and B loans, although the tenors of the two loans may differ.
Participation agreements are signed between IFC and each participating financial institution in the B loan. The participant's relationship with the borrower is therefore indirect through IFC, with IFC as the sole lender of record and administrator of the loan. The participant's involvement, however, is known to the borrower and is included in any publicity for the transaction.
This structure allows the B loan participants to fully benefit from IFC's status as a multilateral development institution. All payments including principal, interest, and fees gain the advantage of IFC's preferred creditor status. IFC commits to the participants to distribute all payments pro rata among itself and the participants. As a result, IFC cannot be paid in full until all participants are paid in full. Similarly, a default to a participant would be a default to IFC.
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