B loan january 2010

B-LOAN PROGRAM January 2010

The IDB provides solutions to development challenges in 26 countries of Latin America and the Caribbean, partnering with governments, companies and civil society organizations

The IDB lends money and provides grants. It also offers research, advice and technical assistance to improve key areas like education, poverty reduction and agriculture. Our clients range from central governments to city authorities and small businesses

The Bank also seeks to take a lead role on cross-border issues like trade, infrastructure and energy

IDB - WHO WE ARE

The IDB is the main source of multilateral financing and expertise for sustainable economic, social and institutional development in Latin America and the Caribbean.

26 Borrowing member and 22 non-borrowing member countries

$10 billion in approved lending and grants over the past 12 months

Backed by a AAA/Aaa rating by both Standard & Poors and Moody’s

IDB - WHO WE ARE

Responsible for leading the Bank’s operations without sovereign guarantee

Partners with commercial banks, institutional investors, co-guarantors, and other co-lenders to meet the growing of financial resources

Target clients:

Privately controlled entities in all sectors of the economy

Utilities and other infrastructure operators

Banks and other financial market institutions

State-owned companies without a sovereign guarantee

Corporates

IDB PRIVATE SECTOR

SCF focuses on mid to large-cap transactions

Transaction sizes (IDB funds)Minimum US$10 million

Typical US$35 million or above

Maximum US$200 million

50% of projects cost (25-40% if greenfield)

Target clients:Privately controlled entities in all sectors of the economy

Utilities and other infrastructure operators

Banks and other financial market institutions

State-owned companies without a sovereign guarantee

Corporates with annual sales of US$100 million and above

STRUCTURED & CORPORATE FINANCE (SCF)

Focus on development effectiveness

Key service sectors: basic infrastructure and financial markets

Support green projects

Better serve the needs of smaller economies

Seek transactions that promote social inclusion

Products

Loans

GuaranteesPartial Credit Guarantees (covering all risks – up to 50% usually or up to 100% within Trade Finance Facilitation Program) or Political Risk Guarantees

Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale)

IDB-reimbursement rights can be subordinated to other investors

STRUCTURED & CORPORATE FINANCE

Set up as an incubator within the private sector to drive innovation and best practices in applying market-based solutions to advance economic and social development at the base of the socioeconomic pyramid (BOP).

US$ 250 million set aside from the Bank’s Ordinary Capital.

Created to foster collaboration between the public and private sector, and civil society, to attract new resources to address poverty challenges in the region.

Target clients:Private sector organizations, corporations, financial institutions, investment funds, and state-owned companies, without sovereign guarantees, operating in one or more of the 26 borrowing member countries of the IDB and interesting in engaging with the BOP.

Organizations should be in sound financial health and be able to demonstrate a good record of corporate governance and environmental and social responsibility.

OPPORTUNITIES FOR THE MAJORITY (OMJ)

The Opportunities to the Majority initiative supports project with the potential to deliver business solutions to the 360 million people in the region living at the base of the pyramid.

To be eligible for financing the project must be: Financially and structurally sound.

Innovative and with the capacity to be repeated and brought up to scale once proven successful.

Structured to engage multiple stakeholders.

Lending highlights

Loans and partial credit guarantees

Market-rates

Long tenors

Technical assistance provided with loans.

Coverage between 25-50% of total project cost.

OPPORTUNITIES FOR THE MAJORITY

Operating Principles

Invest in business solutions to achieve a positive impact on the lives of the majority.

Demonstrate that investing in underserved markets is good business.

Apply innovation and creativity to fulfill unmet human needs and contribute to economic growth.

Create new solutions through alliances with the public and private sectors and civil society.

Share risk among several partners.

OPPORTUNITIES FOR THE MAJORITY

A/B Loans

“A Loan” – IDB Loan TrancheUsually the A Loan has a longer tenor than the B Loan

“B Loan” – Participation of Market Players (private investors like international banks, institutional investors and funds)

The B Loan is pari passu with the A Loan, sharing the risk of the deal

There is no guarantee on the B Loan from IDB

IDB is Lender of Record

IDB PRIVATE SECTOR FINANCIAL PRODUCTS

MOBILIZATION MANDATE

Excerpt from the 8th Replenishment

“ 2.82 Mobilization of additional funds. As part of its cofinancing activities, the Bank will step up its efforts to mobilize additional resources, particularly from private sources, for priority development initiatives, and especially for infrastructure and public utility projects carried out by the private sector.”

BorrowerBorrowerParticipantsParticipants

One loan agreement – IDB is lender of record and administers entire loan

IDB fully shares project risk with participants

Participation structure allows participants to benefit from IDB’s privileges and immunities

Loan Loan AgreementAgreement

A + B A + B LoansLoans

B LoanB Loan

Participation Participation AgreementAgreement

B-LOAN STRUCTURE

Preferred access to foreign exchange in the event of country foreign exchange shortage

Excluded from general country debt reschedulings

Not subject to mandatory new money obligations under general country debt rescheduling

Consistent universal recognition - Pakistan, Russia, Argentina

Bank regulators exempt B Loans from mandatory country risk provisioning

Allows rated transactions to pierce sovereign ceiling

Recognized mitigant of country risk under Basel II

PREFERRED CREDITOR STATUS (PCS)

Standardized approach:

Banks may apply the local currency rating of the borrower (as opposed to the foreign currency rating), recognizing the effective mitigation of transfer and convertibility risk

Advanced Internal Ratings-Based (IRB) approach:

Banks may reflect the country risk mitigation afforded by the B loan structure through lower country risk weighting

PCS: CAPITAL TREATMENT OF B LOANS UNDER BASEL II

Tenor profile in the region

B-LOAN ADVANTAGE

* Chile and Mexico are the only countries where international lenders have felt comfortable lending on a project finance basis without an ECA guarantee or MDB umbrella

INVESTMENT GRADE

NON INVESTMENT GRADE

PROJECT FINANCE

UNCOVERED(Without MDB

umbrella)Up to 5 yrs. Up to 3 yrs. Generally

Unavailable *

B-LOAN 5 yrs. or greater 3 – 5 yrs. 10 – 14 yrs.

Participations vs. Assignments

Assignments create direct contractual rights with the borrower

Assigner becomes a “lender” with full voting and other rights

Participant’s rights and obligations vis-à-vis the borrower are derivative IDB’srights and obligations

Lender of Record vs. Agency Role

IDB is not acting as agent

Agent is appointed by the lenders

Agent acts under instruction of lenders

Neither is a fiduciary

B-LOANS VS. SYNDICATED LOANS

How do B-Loans differ from regular syndicated loans?

Participants share IDB’s Preferred Creditor Status and therefore mitigate transfer and convertibility risk

Where applicable, participants are exempt from mandatory country risk provisioning requirement

Environmental and Social leadership

Participants benefit from IDB’s relationship with host country governments (“halo effect”)

Basel II has recognized the value of B-Loans, which can result in lower ascribed capital allocation (can use local vs. foreign ratings)

BENEFITS TO B-LOAN PARTICIPANTS

B-Loans complete the entire financial package

Borrowers can achieve financing with longer tenors than without umbrella cover

B-Loan syndication can introduce new lending relationships to the Borrower

Simplified administration with one point of contact

Transaction is exempt from withholding tax

BENEFITS TO B-LOAN BORROWER

Helps the Bank meet its catalytic role

Tool to spread the credit risk exposure

Mobilization of funds

Gain additional sector expertise from other market players

Maintain our finger on the pulse of the market

BENEFITS OF B-LOANS TO IDB

100%: Change in money terms

100%: Waive or amend conditions precedent

67%: Acceleration by IDB at request of Participants

67%: Release security or waive negative pledge

67%: Waive or amend guarantees or support arrangements

67%: Change in ownership control provision

51%: Waive or amend financial covenants

Consult: Waive or amend non-financial covenants

PARTICIPANT’S VOTING RIGHTS

(Percentages reflect consent level required, based on total B Loan amount)

INFORMATION SHARING

IDB shares with Participants all information we receive from Borrowers under the Loan Agreement

This includes:

Regular financial reporting

Knowledge of key credit events

Objective participant eligibility criteria

“Eligible Financial Institution”

Not incorporated or residing in the country of the borrower or the project

Not an export credit, governmental, or multilateral agency

International investment grade rating from Fitch, Moody’s or S&P

Non-investment grade and unrated financial institutions may be considered on a case-by-case basis

PARTICIPANT ELIGIBILITY

B-LOANS VS. SYNDICATED LOANS Participants in B-Loans have limited rights compared to typical syndicated

loans

B-Loan Syndicated Loan

Consent right on “money” terms (unanimous), security (67% majority) and financial covenants (51% majority), subject to materiality

Has no contractual relationship with Borrower

Disposals are subject to IDB approval

Full voting rights on all credit and administrative matters

Lender has full legal recourse to Borrower

Disposals subject to Borrowers approval, but no limitations under default scenario

B-LOAN PROGRAM

Historical ResultsHistoricalHistorical ResultsResults

Number of B-Loans Closed: 58Number of BNumber of B--Loans Closed: 58Loans Closed: 58

Amount of B-Loan mobilized: $5.87 billionAmount of BAmount of B--Loan mobilized: $5.87 billionLoan mobilized: $5.87 billion

Number of historical participants: 124 institutionsNumber of historical participants: 124 institutionsNumber of historical participants: 124 institutions

PERFORMANCE HISTORY % write-off / A-loan outstanding (which has B Loan)

0.00%

0.47%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%

0.48%

2.16%

0.00%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

% Impaired Loan / A-loan outstanding (which has B Loan)

0% 0% 0% 0% 0%

6%

21%19% 18%

7%

0% 0%

12%

23%

0%5%

10%15%20%25%30%35%40%45%50%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Jozef HenriquezChief of Syndications UnitTel: (1) 202-623-1424Email: [email protected]

SYNDICATIONS TEAM

Brian BlakelySenior Syndications OfficerTel: (1) 202-623-2991Email: [email protected]

Kristin DaceySyndications OfficerTel: (1) 202-623-3349Email: [email protected]

Jaspreet BirkSyndications OfficerTel: (1) 202-623-2345Email: [email protected]

Eliana DuqueOffice AssistantTel: (1) 202-623-3731Email: [email protected]

Kentaro AoyamaSyndications OfficerTel: (1) 202-623-2811Email: [email protected]

2009

Noble Argentina

US$70,000,000 B Loan 5 years

Argentina

2009

Crecera Finance Company

US$77,500,000

B Loan 2 years

Regional

2009

Adeco Agropecuaria S.A. and Pilagá S.R.L.

US$ 49,000,0000 B Loan 5 years

Argentina

2008

BBVA Banco Continental

US$ 10,000,0000 B Loan

10 years

Peru

2008

Gerdau Açominas

US$ 150,000,0000 B Loan 7 years

Brazil

2008

Bicbanco

US$ 90,000,0000 B2 Loan 3 years

Brazil

2008

Instituto Costarricense de Electricidad

US$ 210,000,0000 B Loan

10 years

Costa Rica

2008

Peru LNG

US$ 400,000,0000 B Loan

Construction + 12 years

Peru

2008

SABESP

US$ 150,000,0000 B Loan

$100 M 12 yr / $50 M 10 yr

Brazil

2008

Linha 4 - Amarela

US$ 240,000,0000 B Loan

12 years

Brazil

2008

ATE III

US$ 110,000,0000 B Loan

12 years

Brazil

2007

Bicbanco

US$ 80,000,0000

B1 Loan 3 years

Brazil

2007

Charrua-Temuco Transmission Line

US$ 35,278,000 B Loan

20 years

Chile

2007

Delba Vessel

US$ 375,278,689 B Loan

10 years

Brazil

2007

Telefonica Moviles Colombia

US$ 475,000,0000 B Loan 5 years

Colombia

2007

Celtins

US$ 20,000,0000 B Loan 6 years

Brazil

2007

Embratel

US$ 220,000,000 B Loan 5 years

Brazil

2006

BBVA Banco Continental

US$ 105,000,000 B Loan 5 years

Peru

2006

ATE II

US$ 11,754,000 B Loan

12 years

Brazil

2006

Celpa Investment Program

US$ 60,000,0000

B Loan 6 years

Brazil

2006

Cemat Investment Program

US$ 29,500,0000 B Loan 6 years

Brazil

2006

Crecera Finance Company

US$ 90,000,0000

B Loan 4 years

Regional