CLOSING REMARKS 1. Co-financing and Preferred Creditor Status 2. - PowerPoint PPT Presentation

CLOSING REMARKS 1. Co-financing and Preferred Creditor Status 2. African Financing Partnership 3. Working with African Development Bank

A/B LOAN STRUCTURE  AfDB acts as Lender-of-Record  Keeps part of the loan for its own book (the A-loan)  Sells participations to commercial investors (the B-loan)  Tried and tested technology (mirrors EBRD / IFC structures)  B-loan participants take exposure to the underlying project credit risk  A and B loans may have different maturities with consistent pricing Debt servicing is centralized in a facility “agent”   B-lenders can be bank or non-bank  Over the life of the B-loan, the A-loan must always be at least 25% of the total  B- lenders benefit from ADB’s preferred creditor status

A/B LOANS Preferred Creditor Status – mitigants to political risk: Official • Currency conversion / remittance of interest • Immunity from sovereign rescheduling • Exemption from withholding tax Unofficial • Deterrent effect: nationalisation, interference

A/B LOANS Benefits to B-lenders: 1. Under Basle II (Standardized approach), B-lenders may rate facilities as local currency obligations; 2. Under Advanced Internal Ratings approach, lenders may reflect country risk mitigation in country risk weighting 3. B-loans may be combined with commercial political risk insurance. Preferred creditor status is reflected in premium rates.

A/B LOANS B-Loan Participant Eligibility: Viable and commercially operated financial institutions – bank  and non-bank Institutions NOT eligible:  Banks incorporated or with head office in the country where the borrower is – incorporated or the project is located Export credit agencies – Governmental, quasi-governmental, or multilateral agencies – Project sponsors and off-takers – Eligible participants require an investment grade rating  AfDB may accept lower-rated or unrated participants –

THE AFRICAN FINANCING PARTNERSHIP  African Development Bank  Development Bank of Southern Africa  DEG  European Investment Bank  FMO  Industrial Development Corporation  IFC  Proparco

THE AFRICAN FINANCING PARTNERSHIP Origins and Rationale  Formed during the financial crisis  Need for DFIs in Africa to improve operating efficiency and to reduce the burden on clients  Serves as a means of harmonisation, standardisation and best practice

THE AFRICAN FINANCING PARTNERSHIP  Focus on large scale infrastructure and industries projects, but:  Innovative smaller projects / financial services / public-private partnerships may be considered.  Some diversification in criteria  Definition of private sector – IFC  Geography – DBSA / SADEC  Operational Guidelines  Possible future partners

WORKING WITH AFRICAN DEVELOPMENT BANK  Timing:  Lead times of approvals v. Lead time of projects  Special considerations:  Additionality  Environmental and Social Impact  Development impact  Focus: project first, then loan  Partner rather than lender of last resort

FIRST B-LOAN Transnet Ltd., RSA  A-loan: US$400 million + B-loan: US$410 million  A-loan: 10 years / 2 grace + B-loan: 7 years, 2 grace  SMBC (Agent), Bank of China, Mizuho, BTMU, HSBC  Signed October 2011

RECOGNITION Infrastructure Journal, April 2012:  MLA of The Year – Power  Multilateral of The Year.