Asian Development Bank Commercial Cofinancing Products Private - PowerPoint PPT Presentation

Asian Development Bank Commercial Cofinancing Products Private Sector Operations Department Guarantees and Syndications Unit November 2013

Outline  ADB – Key Facts  ADB Operations and Strategy 2020  Role of Guarantees and Syndications Unit  Commercial Cofinancing Products  Risk Transfer Structures  Recent Transactions 2

ADB – Key Facts  Founded in 1966  67 members – 48 regional members – 19 non-regional members  Headquarters in Manila, Philippines  Financing in 2012: $21.6 billion  Source of Funds – Ordinary Capital Resources – Asian Development Funds  Products – Loans, equity, guarantees, grants, and technical assistance 3

Approvals by Financing Source ($ million) 2011 2012 Ordinary Capital Resources 11,306 10,136 Loans 10,651 9,402 Guarantees 417 403 Equity Investments 239 131 Supply Chain Finance - 200 Special Fund Resources 2,716 3,164 Asian Development Funds 2,552 3,009 Technical Assistance Funds 139 142 Other Special Funds 25 13 Subtotal 14,022 13,299 Direct Valued Added 7,694 8,272 Total 21,716 21,571 4

ADB Operations  Private Sector Operations Department – Responsible for nonsovereign operations – Also responsible for commercial cofinancing, including sovereign and nonsovereign guarantee operations, and loan syndications  Five Regional Departments – Central and Western Asia Department – South Asia Department – Pacific Department – Southeast Asia Department – East Asia Department 5

Non Sovereign Approvals ($ million) 2011 2012 Public 700 224 Loans 600 20 Guarantees - 128 B Loans 100 - Risk Transfers 76 Private 5,619 7,739 Loans 1,000 1,087 Equity Investments 89 131 Guarantees 417 275 Supply Chain Finance - 200 Technical Assistance Grants 9 5 Official Cofinancing - 19 B Loans 100 200 Parallel Loans 1,623 3,341 Technical Assistance Cofin. 1 - TFP Cofinancing 2,381 2,344 Guarantee Cofinancing - 87 Risk Transfer - 51 Total 6,319 7,962 6

Strategy 2008-2020  By 2020 – 50% of ADB’s lending portfolio in private sector development and private sector operations – Cofinancing ( commercial and official ) will equal 100% of lending operations • E.g. $10 billion lending operations = $10 billion cofinancing 7

Guarantees and Syndications Unit  Role of GSU – Located in PSOD – Mobilize commercial cofinancing for both sovereign and non sovereign operations using guarantees, loan syndications and risk transfer products – Support both ADB’s Private Sector Operations Department and 5 Regional Departments 8

ADB Commercial Cofinancing Products  Guarantees  Risk Transfer Products  Loan Syndication (B loans) 9

Direct Valued Added ($ million) 2011 2012 Project Cofinancing 7,483 8,125 Official Cofinancing 3,279 2,028 Loans 2,308 1,745 Grants 971 283 Commercial Cofinancing 4,204 6,097 B Loans 200 200 Parallel Loans 1,623 3,341 TFP Cofinancing 2,381 2,344 Guarantee Cofinancing - 87 Risk Transfers - 126 Technical Assistance 210 147 7,694 8,272 10

Guarantee Products  Partial Risk Guarantees ( political risk insurance ) - PRG – Transfer Restriction – Expropriation – Political Violence – Breach of Contract • Denial of Justice and Arbitration Award Default  Partial Credit Guarantees - PCG – Covers commercial and political risks – Non-honoring of a Sovereign Guarantee or Sovereign Borrower • Covers sovereign/government payment risks 11

Eligible Operations  Guarantees and loans are available for: – Sovereign Operations ( with government guarantee to ADB ) – Nonsovereign Operations ( no government guarantee to ADB ) 12

Typical Guarantee Structure Sovereign Operation Loan Guaranteed Public or Private Lender Borrower PCG or PRG 40 bps p.a. Member Government Government guarantee (sovereign operations only) 13

Typical Guarantee Structure Nonsovereign Operation Loan Guaranteed Public or Private Lender Borrower PCG or PRG Guarantee Guarantee Member Government 14

Guarantees Approvals (1988-2012) Sovereign Non-Sovereign Total Guarantees No. of Projects 15 PCG 15 PCG 30 6 PRG 10 PRG 16 Guaranteed Amount $3,307 b $2,266 b 46 15

Areas of Operation  Core areas (80%) – Infrastructure • Energy (including power), transport, telecommunications, water and urban infrastructure – Capital markets and financial sectors  Other areas (20%) – Exploring use of PRGs – Agriculture – Education – Health 16

Eligibility Criteria  Trade and investment  Any type of debt (bank loans, bonds, shareholder loans)  Guarantees in local currency or foreign exchange  Guarantee holders can be investors and lenders from the host country, or foreign  Guaranteed percentage can be up to 100%, but encourage risk sharing  Long tenor (matches the terms of the guaranteed loan)  Procurement: Good from ADB member countries and economy and efficiency 17

Pricing of Guarantees  Sovereign projects – 40 bps per annum (PCG or PRG) – Fee same for all DMCs  Nonsovereign Projects – Benchmarked to commercial market rates, but also export credit agencies  Guarantee fee is calculated on the guaranteed percentage of outstanding principal, plus one interest payment 18

Size of the Guarantee (net)  PRG – Lesser of 40% of project costs or $400 million (net)  PCG – Lesser of 25% of project costs or $250 million (net)  Additional amount can be obtained through guarantee syndications with public and private insurers and guarantors 19

Risk Transfer Products Loans and Guarantees Loan Guaranteed Borrower Lender Private or Public Guarantee Loan PRI/Guarantor Risk Transfer 20

Risk Transfer Arrangement  Sovereign risk participant – AAA rated: 95% netting (consumes only 5% ADB headroom and ELR) – AA+ rated: 90% netting  Private risk participant – AAA rated: 90% netting – AA- and above: 80% netting (consumes only 20% headroom) 21

Impact of Risk Transfer Arrangements  Before – $100 ADB guarantee or loan – $50 transferred to AAA sovereign – Consumes 100% of ADB headroom  Now – $100 ADB guarantee or loan – $50 transferred to AAA sovereign or up to AA- – Consumes 52.5% of ADB headroom if AAA sovereign – (60% if AA- private) 22

Partial Risk Guarantee & Reinsurance Kandym Gas Field (Uzbekistan) $300 m Guaranteed Loans Project Company Lenders $100 m loan $100 m PRG $200 m PRG Claims $150 m Cooperation Reinsurance Commercial Reinsurers 23

Partial Credit Guarantee Foundation Wind Energy I Limited (Pakistan) Fauji Foundation Wind Farms $132 m ijarah (lease finance) musharaka Pakistani Banks $66 m PCG 24

ADB Local Currency Loan with Risk Participation Bangchak 44 MW Solar Power Project (Thailand) BANGCHAK PETROLEUM PUBLIC CO. LTD THB 4.2 billion ADB Loan Unfunded risk participation 25

Loan Syndication - B Loan Export Import Bank of Indonesia A loan Export Import Participation $100 mm Bank of Agreement Indonesia $200 mm B loan (Borrower) B Lender $100 mm Facility Agreement 26

B Loan Track Record  ADB has arranged 52 B loans for 52 projects in 11 countries, for a total of $3.13 billion 27

GSU Contacts (Guarantees) Shantanu Chakraborty Advisor Guarantees and Syndications Unit schakraborty@adb.org +632 632 4357 Christophe Bellinger Lead Guarantees and Syndications Specialist, PSOD cbellinger@adb.org +632 632 5704 Bart Raemaekers Senior Guarantees and Syndications Specialist, PSOD braemaekers@adb.org +632 632 6852 28

GSU Contacts (B Loans) DC Song Senior Guarantees and Syndications Specialist, PSOD dcsong@adb.org +6326326115 29