Debt & Equity Mobilization - From Billions to Trillions

DEBT & EQUITY MOBILIZATION BILLIONS TO TRILLIONS

Panel Firm Workshop 2017 Washington DC December 12, 2017 Meaghan McGrath Sarah O’Sullivan

- FRO

Overview

WHY MOBILIZATION? “Catalyzing and mobilizing other sources of finance for private enterprise development” is a key part of IFC’s Strategy 3.0    

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IFC does not have unlimited capital To grow IFC activities more rapidly than our own capital Management refers to IFC volumes including mobilization Additional fee income without usage of capital

IFC Syndications B Loans Debt Mobilization - Overview

IFC’S SYNDICATED LENDING PROGRAM  Oldest and largest syndicated lending program among multilateral development banks, established in 1957  Over US$50 billion mobilized from more than 500 financial institutions for over 1,000 projects in more than 110 emerging markets  Co-financiers include international commercial banks, local and regional banks in emerging markets, funds, insurance companies, development finance institutions (DFIs) & an emerging market central bank  As of June 30, 2017, IFC’s syndicated loan portfolio under management totaled US$16 billion

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IFC Syndications B Loans Debt Mobilization - Overview

FY17 LONG-TERM INVESTMENT COMMITMENTS: $19.3 BILLION 25

20

$17.5 6.5 bn

$19.3 7.4 bn

$15.1 bn

15

10

$17.7 7.1 bn

$18.8 7.7 bn

5.1

11.0

10.0

10.6

11.1

FY14

FY15

FY16

11.9

5

0

FY13

IFC's Own Account

4

Mobilization

FY17

B Loans Debt Mobilization - Overview

STATISTICS – GLOBAL FY2015

FY2016

B Loans

Parallel

MCPP Loans

B Loans

Parallel

MCPP Loans

B Loans

Parallel

MCPP Loans

1,853

1,522

818

3,670

1,204

541

1,610

1,509

356

Number of Deals:

36

16

23

36

21

17

32

27

9

Average Loan Size (US$m):

52

94

36

102

57

32

50

56

40

Average Final Maturity (yrs):

9

14

-

8

10

-

6

10

-

Average Margin (bps):

355

462

-

450

422

-

395

500

-

Volume (US$m):

Fiscal year-end is June 30

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FY2017

B Loans Debt Mobilization - Overview

DEBT MOBILIZATION: Key Products

 B Loans  Parallel Loans  Managed Co-Lending Portfolio Program

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B Loans Debt Mobilization - B Loans

B LOAN STRUCTURE Loan Agreement

Borrower Borrower A + B Loans Participation Agreement

B Loan

 One loan agreement – IFC is lender of record and administers entire loan  IFC fully shares project risks with participants

Participants Participants

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

B Loans Debt Mobilization - B Loans

PARTICIPANT ELIGIBILITY  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

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B Loans Debt Mobilization - B Loans

BENEFITS TO BORROWERS  Enables loans with longer tenors & no withholding tax*  Completes financial package  Introduces new banking relationships  IFC’s “stamp of approval”  IFC’s environmental and social leadership

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B Loans Debt Mobilization - B Loans

TOP 20 PARTICIPANTS New Signings July 1, 2016 – June 30, 2017

Committed Portfolio as of June 30, 2017 US$ ‘000

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US$ ‘000

1

SANTANDER

257,000

1

SANTANDER

699,617

2

APOLLO

147,210

2

FMO

656,622

3

INDUSTRIAL AND COMMERCIAL BANK OF CHINA

145,000

3

INDUSTRIAL AND COMMERCIAL BANK OF CHINA

475,000

4

ITAU

121,500

4

SUMITOMO MITSUI FINANCIAL GROUP

474,796

5

FMO

118,200

5

CREDIT AGRICOLE

341,681

6

ANZ

100,000

6

UNICREDIT

335,737

7

RABOBANK

97,500

7

ING

314,296

8

RESPONSABILITY INVESTMENTS

68,975

8

DNB ASA

283,118

9

ABN AMRO

64,500

9

ANZ

261,750

10 CLIFFORD CAPITAL

62,000

10 HSBC

260,715

11 CATHAY UNITED BANK COMPANY LIMITED

50,000

11 KFW-IPEX

250,171

11 CITI

50,000

12 KOREA DEVELOPMENT BANK

249,463

13 STANDARD CHARTERED

45,000

13 ITAU

245,722

14 HSBC

40,000

14 COMMERZBANK

231,841

15 ING

37,500

15 BANK OF CHINA

231,000

16 FIRST ABU DHABI BANK

30,000

16 RABOBANK

211,783

17 COMMERZBANK

24,200

17 NORDEA BANK

207,462

18 EMERGING AFRICA INFRASTRUCTURE FUND

24,150

18 ARAB BANK GROUP

201,745

19 FIRSTRAND BANK

21,000

19 SOCIETE GENERALE

191,892

20 ARAB BANK GROUP

20,000

20 MITSUBISHI UFJ FINANCIAL GROUP

184,596

B Loans Debt Mobilization - B Loans

BENEFITS TO PARTICIPANTS  Preferred Creditor Status (PCS)  Recognition of IFC’s risk mitigation by  Regulators  Rating agencies  Basel II  Private PRI providers  IFC’s environmental and social leadership  IFC’s structuring and restructuring skills

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B Loans Debt Mobilization - B Loans

PARTICIPANT’S VOTING RIGHTS  100%: Change in money terms  100%:

Waive or amend conditions precedent

 67%:

Acceleration following payment default

 67%:

Release security or waive negative pledge

 67%:

Waive or amend guarantees or support arrangements

 51%:

Change in ownership control provision

 51%:

Waive or amend financial covenants

 Consult:

Waive or amend non-financial covenants (Percentages reflect consent level required, based on total B Loan amount)

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Debt Mobilization - B Loans

INFORMATION SHARING IFC shares with Participants all information received from Borrowers under the Loan Agreement, including regular financial reporting & knowledge of key credit events

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B Loans Debt Mobilization - B Loans

IFC AND RISK MITIGATION Country Risk

Credit Risk

 IFC’s Preferred Creditor Status

 First-class due diligence and analysis

 IFC’s Environmental & Social Standards

 IFC’s effective mitigation of transfer and convertibility risk

 IFC’s global presence and knowledge

 Extensive governance due diligence

 IFC’s structuring and restructuring skills

 World-class in-house specialists

 IFC access / relationships to national governments

 Strong security packages  Long-term funding, avoiding refinancing risks

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Reputational Risk

B Loans Debt Mobilization - Parallel Loans

SYNDICATED PARALLEL LOANS  Partnership with financial institutions which are not eligible B Loan participants such as Development Financial Institutions (“DFIs”) or local commercial banks  To improve cooperation with DFIs, IFC developed a Master Cooperation Agreement (MCA) that streamlines how IFC works with DFIs to co-finance projects when IFC is the mandated lead arranger  IFC has mobilized over US$9.5 billion from parallel lenders, including DFIs and local commercial banks for borrowers, globally

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B Loans Debt Mobilization - Parallel Loans

TOP 20 PARALLEL LENDERS New Signings July 1, 2016 – June 30, 2017

16

US$ ‘000

1

INTER-AMERICAN INVESTMENT CORPORATION

230,000

2

FMO

163,825

3

ASIA DEVELOPMENT BANK

158,500

4

OPEC FUND FOR INTERNATIONAL DEVELOPMENT

101,845

5

DEG

97,900

6

INDUSTRIAL AND COMMERCIAL BANK OF CHINA

90,000

7

PROPARCO

82,345

8

OPIC

79,000

9

ISLAMIC DEVELOPMENT BANK

66,000

10

JAPANESE INTERNATIONAL COOPERATION AGENCY

62,840

11

ADITYA BIRLA FINANCE

50,400

12

CHINA CONSTRUCTION BANK

50,000

13

CDC

47,000

14

ADITYA BIRLA MUTUAL FUND

31,000

15

INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY

28,825

16

DEVELOPMENT BANK OF SOUTHERN AFRICA

27,345

16

INVESTEC BANK

27,345

18

EMERGING AFRICA INFRASTRUCTURE FUND

25,000

19

AFRICAN DEVELOPMENT BANK

20,000

20

CORPORACION ANDINA DE FOMENTO

15,000

B Loans Debt Mobilization - Parallel Loans

SYNDICATED PARALLEL LOAN STRUCTURE

Inter-creditor and Security Sharing Agreement

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B Loans Debt Mobilization - Parallel Loans

SYNDICATED PARALLEL LOANS

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

IFC approaches parallel lenders as if syndicating a B Loan



Early contact for preliminary interest and feedback



Assist due diligence process by sharing information memorandum and managing project appraisals



Negotiate documentation among all parallel lenders



All lenders sign a single Common Terms Agreement and short form individual loan agreements covering money terms (IFC does not act as Lender of Record for parallel lenders)



Where there is a local currency loan by a local bank / FI, which may, due to the requirements of the lender need to be governed by local law, we have developed a “Common Terms Schedule”, which replaces the CTA.

B Loans Debt Mobilization - Parallel Loans

BENEFITS TO BORROWERS  Enhanced access to financing from DFIs and other ineligible B Loan participants, particularly for longer tenors and in frontier countries and sectors  Time and cost savings throughout the life of the facility

BENEFITS TO LENDERS  Increased deal flow through IFC’s global origination capacity  Access to IFC’s due diligence, structuring and restructuring skills and global presence  Time and cost savings  All lenders, including IFC, share the same rights and obligations 19

B Loans Debt Mobilization - MCPP

MANAGED CO-LENDING PORTFOLIO PROGRAM (“MCPP”)  MCPP is a syndicated loan platform providing a portfolio approach to debt mobilization & allowing institutional investors the opportunity to passively participate in IFC’s future loan portfolio.  Investors provide capital on a portfolio basis, which can be deployed by IFC in individual investments across all regions and sectors in accordance with IFC’s strategy and processes, subject to the investors’ specified eligibility criteria.  MCPP investor approval is sought pre-mandate; project appraisal, approval, commitment, and supervision are managed directly by IFC with the MCPP investor passively following IFC decisions.  Allows IFC to provide larger tickets and thereby enabling IFC to complete financing packages on a standalone basis 20

B Loans Debt Mobilization - MCPP

BENEFITS TO BORROWERS  Borrowers have certainty of financing at mandate stage  Reduces transaction costs through a streamlined engagement with IFC

BENEFITS TO INVESTORS  Exposure to a diversified pool of assets  Cost effective delivery process that directly leverages IFC in built capacity

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Debt Mobilization - MCPP

MCPP: A New Future For Debt Mobilization

MCPP MCPP Infrastructure

MCPP Sovereign

MCPP SAFE

MCPP HKMA

MCPP Allianz

MCPP Prudentia l

MCPP Unfunded

MCPP AXA

MCPP FIG (Credit Insurance

)

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MCPP URP

Debt Mobilization - MCPP

MCPP Sovereign: SAFE 





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In 2013, the People's Bank of China, through SAFE, its State Administration for Foreign Exchange, pledged $3 billion under the MCPP platform to be committed over a six-year period.

In one-and-a-half years, $1.5 billion was disbursed in 60 investments across the IFC’s portfolio in 30 different countries.

This collaboration is particularly significant because the IFC used it as a template to launch the MCPP Infra Initiative, and was the foundation for MCPP HKMA.

MCPP Sovereign: HKMA 

In September, 2017 the Hong Kong Monetary Authority (HKMA) signed on to become a part of IFC’s MCPP program.



MCPP HKMA follows the SAFE structure, and officially launched in October, 2017.



HKMA has committed $1 billion.

Debt Mobilization - MCPP

MCPP: Basic Sovereign Investor

Administrativ e Agreement Loan Agreements and Portfolio Management

Sovereign Investor

IFC Trust Fund

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IFC as Implementing Entity

Borrower s

Debt Mobilization - MCPP

MCPP Infrastructure  MCPP Infrastructure officially launched in October, 2017.  Designed for institutional investors seeking to increase their exposure to emerging-markets infrastructure.  Platform on which private institutional investors and IFC coinvest in infrastructure loans in emerging markets.  IFC will originate, approve, and manage the portfolio of loans that will mirror IFC’s own portfolio in infrastructure.  These are MCPP B Loans available to eligible infrastructure projects.  Commitments: Allianz $500mn, Prudential $500mn and AXA $500mn (expected)

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Debt Mobilization - MCPP

MCPP: Basic Institutional Investor

B-Lender

Facility Participation Agreement

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Fund

Loan Agreements and Portfolio Management

Borrower s

Debt Mobilization - MCPP

MCPP Infrastructure Structure

 With support from SIDA, IFC will provide a limited first-loss guarantee on the investments to meet the riskreward profile that institutional investors require.

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Debt Mobilization - MCPP

MCPP Unfunded – FIG (Credit Insurance)  MCPP Financial Institutions will tap $500 million apiece in unfunded credit insurance from Munich Re and Liberty Specialty Markets, part of Liberty Mutual Insurance.  This will enable IFC to provide at least $2 billion in loans to commercial banks, offering additional capacity for onlending to small and medium enterprises, women-owned businesses, and climate change strategies.

 The structure involves the insurers taking pari passu credit risk with IFC. 28

Debt Mobilization - MCPP

MCPP Unfunded – Unfunded Risk Participation (URP)  Investors provide IFC with an unfunded risk participation (“URP”) on a portion of an A Loan, with IFC retaining the full asset on its balance sheet.  IFC and the insurer sign a Facility Unfunded Risk Participation Agreement (“FURP”) which details the terms and conditions of the investment relationship.  IFC can provide larger financing to clients but receives capital relief on the part of the A Loan that is covered through the risk participation.

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Debt Mobilization - MCPP

MCPP: General Drafting Notes  MCPP Investor(s) are not party to the Financing Documents –A Loan and MCPP Loan documented in a single loan agreement; IFC signs for itself and as Implementing Entity for the MCPP loan.  Generally, no consents or approvals are required from MCPP Investor(s) - IFC as Implementing Entity has full delegated authority, including in respect of implementation, monitoring, oversight, modification and any restructuring; consent or approval rights that Parallel Lenders or B Lenders might have should not be extended to MCPP Investors.  Disbursements of the MCPP Loan are conditioned upon receipt of funds from the MCPP Investor(s).  IFC will share information with the MCPP Investor(s) during the life of the MCPP Loan.  Even if there are multiple MCPP Investors, there will only be one MCPP Loan and an Omnibus MCPP Agreement among them and IFC to provide guidance on matters that may not have been adequately covered by the relevant Administration Agreements, such as, sharing.  The Administration Agreement(s) and Omnibus MCPP Agreement (if any) are not Transaction Documents and not shared with the Borrower 29

Debt Mobilization - ALPs

A LOAN PARTICIPATION SALES (ALPs)  An A Loan Participation (“ALP”) is an effective exposure management tool which IFC uses to reduce its risk exposures – dollar for dollar – to a client, country or sector.  An ALP is created through the partial sale of an A Loan to commercial banks or other financial institutions and is governed by a Participation Agreement, much like the agreement used for IFC B Loans. As in a B loan, IFC remains the lender of record for the entire A Loan. An ALP participant shares all project risks with IFC and has the same benefits of a traditional B Loan participant.  Since 2002, IFC has sold twenty-one ALPs valued at over US$429 million to over twenty-three financial institutions. Through this mechanism, IFC has reduced its exposure constraints in Argentina, Brazil, India, Romania, Russia, Thailand & Turkey.

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Loans Debt Mobilization - B URP

UNFUNDED RISK PARTICIPATIONS Loan Agreement

Borrower Borrower A Loan Unfunded Risk Participation Agreement

Insurance Insurance Counterparty Counterparty

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 One loan agreement – IFC is lender of record and administers entire loan  IFC fully shares project risks with insurance counterparty  Typically executed on a silent participation basis

Debt Mobilization - Summary

MULTIPLE INVESTMENT PRODUCTS IN A SINGLE PROJECT LP Counter Guarantee's/MCPP (SIDA)

(FIG) Credit Insurance

Financial Institution

H(ALP)

A Loans

URP MCPP URP

LP

Investment Fund

Standard B Loans (B1)

Institutional Investor #1

B Bonds

MCPP B Loans (B2)

B Loans

Borrower

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Institutional Investor #2

Sovereign #1

Institutional Investor #3

Sovereign #2

MCPP Loans

Sovereign #3

Equity Mobilization

EQUITY MOBILIZATION

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Equity Mobilization

WHAT IS THE EMP?

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

Pursuant to the EMP, IFC mobilizes additional equity for existing and new clients and is paid a fee for this work.



IFC’s scope of work includes identifying and contacting potential coinvestors, working with Issuers on initial structuring and pricing of investment opportunities, and providing deal support to potential co-investors.



Even though IFC, as an international organization, does not have a broker-dealer license, a recent full legal evaluation has determined that IFC can provide Equity Mobilization services to its clients, subject to certain limitations.



In connection with launching the EMP, IFC developed a legal/compliance framework that includes (i) template agreements, with key risk mitigation provisions, (ii) procedures, (iii) a compliance manual, and (iii) required internal training and testing for project teams.



To date, 1 deal has been completed – Summit Group. IFC earned a fee of $3.6m, charging 2%-2.5% on the total invested amount of $175.5m. The resulting fee on the total mobilized amount of $113.75m was 3.2%.

Equity Mobilization - EMP

EMP (Cont’d) In Scope – Equity Mobilization

Out of Scope – Equity Syndication

Identifying deals for co-investment

Activities related to mobilizing capital in deals in which IFC does not invest

Identifying and contacting potential coinvestors

Producing an Information Memo on behalf of the Investee Company

Initial structuring and pricing – preparing the term sheet

Fully structuring and processing the transaction and selling down part of the equity thereafter

Providing deal support – e.g. sharing due diligence materials/leading a joint appraisal

Drafting and negotiating legal agreements with Co-investors on behalf of the Investee Company

Charging a fee for mobilizing capital

Fees not commensurate with IFC role

(should aim for higher fee than debt mobilization fee)

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Equity Mobilization - AMC

IFC ASSET MANAGEMENT COMPANY, LLC

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Equity Mobilization - AMC

AMC

 IFC Asset Management Company, LLC, a wholly owned subsidiary of IFC, mobilizes and manages capital for investment in developing and frontier markets.  It was created in 2009 to provide investors with access to IFC’s emergingmarkets investment pipeline and to expand the supply of long-term capital to these markets, enhancing IFC’s development goals and generating profits for investors by leveraging IFC’s global reach, standards, investment approach, and track record.  AMC has approximately $9.1 billion in total assets under management. It manages thirteen investment funds on behalf of a wide variety of institutional investors, including sovereign wealth funds, pension funds, and development finance institutions.

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Equity Mobilization - AMC

AMC – Typical Structure 20% of Commitments (Limited Partner)

IFC 100%

Co-investment Agreement Support Services Agreement

AMC Management Agreement

100%

Fund GP General Partner

AMC Fund LP

Limited Partner 1 Limited Partner 2 Limited Partner 3

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Equity Mobilization - AMC

AMC FUNDS

IFC Asset Management Company had about $9.8

BILLION in assets under management in FY17



IFC Capitalization (Equity) Fund



IFC Capitalization (Sub Debt) Fund



IFC African, Latin American and Caribbean Fund



Africa Capitalization Fund



IFC Russian Bank Capitalization Fund



IFC Catalyst Fund



IFC Global Infrastructure Fund



China-Mexico Fund



IFC Financial Institutions Growth Fund



IFC Global Emerging Markets Fund of Funds



IFC Middle East and North Africa Fund



IFC Women Entrepreneurs Debt Fund



IFC Emerging Asia Fund _

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THANK YOU !