[PPT] - Asian Development Bank Commercial Cofinancing Products Private PowerPoint Presentation

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Asian Development Bank Commercial Cofinancing Products

Private Sector Operations Department Guarantees and Syndications Unit

November 2013

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Outline

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

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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

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Approvals by Financing Source ($ million)

2011 2012 Ordinary Capital Resources Loans Guarantees Equity Investments Supply Chain Finance 11,306 10,651 417 239

10,136

9,402 403 131 200 Special Fund Resources Asian Development Funds 2,716 2,552 3,164 3,009 Technical Assistance Funds Other Special Funds 139 25 142 13 Subtotal 14,022 13,299 Direct Valued Added 7,694 8,272 Total 21,716 21,571

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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

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Non Sovereign Approvals ($ million)

2011 2012 Public Loans Guarantees B Loans Risk Transfers 700 600

100

224 20 128

76

Private Loans Equity Investments Guarantees Supply Chain Finance Technical Assistance Grants Official Cofinancing B Loans Parallel Loans Technical Assistance Cofin. TFP Cofinancing Guarantee Cofinancing Risk Transfer 5,619 1,000 89 417

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100

1,623 1 2,381

7,739

1,087 131 275 200 5 19 200 3,341

2,344

87 51 Total 6,319 7,962 6

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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

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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

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ADB Commercial Cofinancing Products

Guarantees
Risk Transfer Products
Loan Syndication (B loans)

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Direct Valued Added ($ million)

2011 2012 Project Cofinancing Official Cofinancing Loans Grants Commercial Cofinancing B Loans Parallel Loans TFP Cofinancing Guarantee Cofinancing Risk Transfers Technical Assistance 7,483 3,279 2,308 971 4,204 200 1,623 2,381

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8,125 2,028 1,745 283 6,097 200 3,341 2,344 87 126 147 7,694 8,272

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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

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Eligible Operations

Guarantees and loans are available for:

– Sovereign Operations (with government guarantee to ADB) – Nonsovereign Operations (no government guarantee to ADB)

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Typical Guarantee Structure Sovereign Operation

Guaranteed Lender Member Government PCG or PRG 40 bps p.a. Public or Private Borrower Loan Government guarantee (sovereign operations only)

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Typical Guarantee Structure Nonsovereign Operation

Guaranteed Lender Member Government PCG or PRG Public or Private Borrower Loan

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Guarantee Guarantee

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Guarantees Approvals (1988-2012)

Sovereign Non-Sovereign Total Guarantees

No. of Projects

15 PCG 6 PRG 15 PCG 10 PRG 30 16 Guaranteed Amount $3,307 b $2,266 b 46

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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

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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

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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

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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

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Risk Transfer Products Loans and Guarantees

Guaranteed Lender PRI/Guarantor Guarantee Borrower

Private or Public

Loan Risk Transfer Loan

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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)

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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)

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Partial Risk Guarantee & Reinsurance Kandym Gas Field (Uzbekistan)

Guaranteed Lenders Commercial Reinsurers

$200 m PRG

Project Company

$300 m Loans $150 m Reinsurance $100 m PRG Claims Cooperation $100 m loan

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Partial Credit Guarantee Foundation Wind Energy I Limited (Pakistan)

$66 m PCG Fauji Foundation

Wind Farms

$132 m ijarah (lease finance) musharaka Pakistani Banks

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ADB Local Currency Loan with Risk Participation Bangchak 44 MW Solar Power Project (Thailand)

Unfunded risk participation

BANGCHAK PETROLEUM PUBLIC CO. LTD

THB 4.2 billion ADB Loan

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Loan Syndication - B Loan Export Import Bank of Indonesia

B Lender

Export Import Bank of Indonesia (Borrower)

$100 mm $100 mm

$200 mm 26

A loan B loan

Facility Agreement Participation Agreement

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B Loan Track Record

ADB has arranged 52 B loans for 52 projects in

11 countries, for a total of $3.13 billion

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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

GSU Contacts (Guarantees)

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DC Song Senior Guarantees and Syndications Specialist, PSOD dcsong@adb.org +6326326115

GSU Contacts (B Loans)

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