Category: Bonds

The IDB has approved a $409m loan to Brazil’s Bahia state to implement a fiscal modernization program that will include measures to boost tax collection, improve spending controls, and enhance its public debt profile. A first disbursement of $209m will be used to improve the public debt profile and cut payment service by eliminating the residual debt obligations stemming from a 1997 debt agreement with the federal government, says the IDB. A second disbursement of $200m will support improved fiscal management measures, helping the state meet the goals set in its fiscal adjustment program and in the fiscal responsibility law. The loan will help improve cash management, enhance mechanisms to boost tax collection on the state’s vehicle property tax, as well as finalize the implementation of a debt management system and an electronic tax invoice system for large taxpayers.

The IDB has announced that it has approved a $650m credit line to Colombia to help Bancoldex finance investment projects and develop exports. It will initially receive a $100m loan. It will also receive an additional $650m from the local government. The loan is for a 25-year term with a 4-year grace period at an adjustable rate based on Libor.

The IDB has established a $200m partial credit guarantee facility to support FirstCaribbean’s long-term loans to infrastructure projects, tourism ventures and mid-size businesses. The facility, denominated in USD or local currency, will be available for 3 years to support at least $400m in FirstCaribbean lending to private sector borrowers. The IDB says initially the facility will focus on transactions in Jamaica, and later expanded to the Bahamas, Barbados, Belize and Trinidad and Tobago. Separately, the IDB has approved a $194m 25-year loan to the state of Sao Paulo to improve its roads network. The program will be carried out by the Sao Paulo state highways department and the loan has a 5-year grace period and is priced basis Libor.

CAF has approved $660m in loans and credits to three separate borrowers. It agreed to lend $300m to Colombia’s Bancoldex, to help it support SMEs. The Andean development bank also plans to extend a $210m credit line to Panama’s Banconal. Finally, it will lend $150m to Uruguay’s UTE electricity generation and transmission administrator, to support a 3-year program to strengthen the country’s electrical system.

The IDB has approved a $250m loan Colombia to improve water and sanitation services. The bank says this will be the first in up to 3 loans to be disbursed. Colombia intends to increase urban water service coverage from 94.5% to 97.8% in 2011, and in sanitation from 90.1% to 93.2%. Terms were not disclosed. The IDB will also lend $500m to El Salvador to improve the safety net for the poorest municipalities and households. The 2-tranche loan for $200m in 2008 and $300m in 2009 will have a 20-year term with a 5-year grace period at a variable interest rate. And Suriname has obtained a loan of up to $62.5m to repave the 140-km long Meerzog-Albina road, the IDB says. The loan will finance 49% of the total cost of the project. Part of the money will come from the bank’s ordinary capital, with maturity periods of 25-30 years and grace periods of 5-6 years. Another portion will come from the bank’s Fund for Special Operations. The facility will be denominated in US dollars and have a disbursement period of 5 years, the IDB says.

The IDB has agreed provide $2.8bn in financing through three facilities to boost liquidity in the Mexican mortgage and housing sector, it says. It will provide a 10-year $2.5bn sovereign-guaranteed credit line to Sociedad Hipoteca Federal, the first disbursement of which will be a $500m 25-year loan paying a spread over Libor. In a separate, part of the package, the IDB will offer up to $150m equivalent in pesos to eligible Mexican mortgage lenders, following a similar $150m facility brought by the IFC in October. Through the facility, the IDB can provide mezzanine credit support via partial credit guarantees or purchases of mezzanine notes by way of a loan to a trust. It is also able to finance the purchase of up to 15% in RMBS though a loan to a trust, and provide an unsecured loan to a fund providing supporting lenders. Finally, the IDB will make available a $185m loan facility to state-backed lender Infonavit, to support mezzanine portions of its RMBS issuance. Both the $150m and $180m non-sovereign guaranteed loan facilities are available for 3 years, renewable for another 3.

Private sector companies and projects hoping to tap into IDB funds are more likely to be told no in the coming year as demand for the multilateral’s balance sheet soars. Faced with a substantial rise in requests from sovereigns, the IDB will be even more selective in evaluating projects, favoring those that meet stringent development criteria, says an official at the lender. Governments will likely have priority access, reducing the pool available to corporates. However, people at the institution note that the total budget will increase some 20% in 2009. “It’s going to be a complicated, ongoing allocation process in the coming year,” notes an IDB executive, who adds that there is no blanket rule or country limit to determine allocation. Among the IDB’s biggest clients in the region are Colombia, Peru, Brazil, Chile and Panama. IDB president Luis Alberto Moreno said this week that the multilateral will likely lend some $12bn in the coming year, with an additional $6bn coming from an emergency lending facility destined for sovereigns only. That is up from the $9bn-$10bn expected in 2008. The IDB’s private sector division, whose deals can account for no more than 10% of the IDB’s total loan exposure at any given point, approved $2.2bn in loans in 2007. The figure for 2008 is likely to have risen, say bank officials, who decline to specify volume. The IDB has played a major role in providing funds for projects and companies across the region. As needs rise and capital markets remain shut, a reduction in multilateral funds creates added woes for the private sector. Other multilaterals are expected to follow suit with a pullback from corporates, say bankers.

The IDB says it is lending $60m to Jamaica. The loan is for a 20-year term with a 5-year grace period at a variable interest rate. The funds will be used to finance a reform program to improve efficiency of public expenditure by strengthening fiscal discipline and modernizing its public financial and performance management practices.