Category: Bonds

The IDB has approved a $450m loan that will city-owned Empresas Publicas de Medellin (EPM) complete a cleanup of the Medellin River. The loan is for a 25-year term, with a 6-year grace period, at an interest rate based on Libor. The IDB says the financing will help cover construction of a second wastewater treatment plan. When completed in 2012, it will treat about 85% of all wastewater flowing into the river. EPM built the first treatment plant with financing from a $130m IDB loan in 2001.

The IDB expects to report a net investment loss of approximately $1bn on the portfolio for 2008. “The results were mostly unrealized and were recognized in compliance with mark-to-market accounting rules,” says the multilateral, adding that realized losses were $71m. “The results have not materially affected the Bank’s lending or operational capacity,” it adds. The multilateral says it upped loan and credit guarantee approvals by 18% last year to $11.2bn as the global crisis fueled demand for financing in LatAm and the Caribbean. Disbursements totaled $7.6bn, nearly $500m more than the previous year. Some $7.2bn of total approvals, or 64%, was for projects to improve competitiveness and quality of life. The IDB approved $2.4bn in financing for transportation and communication projects and close to $1.2bn in loans for water and sanitation, one of the IDB’s main initiatives. An additional $3.6bn supported projects in energy, capital markets, tourism and agricultural infrastructure, such as irrigation systems. Meanwhile, $3.3bn went to projects that included components to reduce poverty and enhance social equity. “A key set of projects focused on reducing the impact of rising food prices and the financial crisis through conditional cash transfer programs for the poor,” says the IDB. The remaining $707m financed projects to reform and modernize governments. The Bank supported, among other projects, efforts to improve fiscal management and strengthen financial systems. The IDB plans to strengthen its anti-cyclical role to help LatAm and the Caribbean weather the downturn. For 2009, it expects to have another record year of lending by frontloading approvals for key projects across the region. The IDB says it maintains a liquid investment portfolio that covers on average 18 months of loan disbursements, debt service and other liabilities.

Ashmore Investment and Colombian investment bank Inverlink have been picked to manage a $500m infrastructure fund created by the Colombian government, IDB and CAF. Macquarie Capital will join as technical advisor, according to CAF. The consortium was chosen from a group of 5 bidders. The fund will start operations by mid-year, prioritizing investments in sanitation, telecommunications, transport, logistics and energy. IDB and CAF may take a 25% stake in the fund, with the Colombian government and export bank Bancoldex taking the remaining 50%, Carolina Renteria, Colombia’s National Planning Director, tells LatinFinance. Loans to the fund are also under consideration. Renteria says the main goal is to help lure pension fund money to infrastructure and channel liquidity amid the crisis. The fund, a private equity vehicle subject to Colombian laws, seeks to replicate a model that has succeeded in Mexico and is central to the government’s plan to use infrastructure investment to mitigate the impact of global recession. His plan involves spending of $22.0bn this year in more than 100 infrastructure projects, of which $12.5bn is expected from private investors.

Mexico’s Sociedad Hipoteca Federal (SHF) is working on a return to the long-term debt markets, perhaps in the international markets, in order to meet its funding needs. “We are talking with the IDB about a guaranteed product to issue overseas,” says Pedro Guazo, CFO of SHF, adding that the target tenor would be 10-15 years. He adds that SHF will maintain its short-term debt auctions and raise medium-term funding to meet its needs. Guazo says SHF has not tapped the long term markets since 2005. Last year, before the crisis, it obtained a 25-year $2.5bn IDB loan at Libor flat, and a 30-year $1bn World Bank loan, also at Libor flat. Speaking on a panel at LatinFinance’s Cumbre Financiera Mexicana, he says SHF is also aiming to offer mortgage issuers with guarantees for construction bridge loans in the same way it does for RMBS issues, and hopes to have that ready in the next few months.

The financial markets crisis could last 1-3 years, according to a survey of more than 100 bankers. The poll, commissioned by the IDB, IIC and Felaban, notes that 2 out of 3 banking sector executives believe the crisis will affect their domestic markets for 1-3 years. Mexican bank executives are somewhat more optimistic than their Central American and South American counterparts. Six out of 10 executives forecast a decrease in the availability of funding for their financial institutions. Other expected effects are a decline in remittances and in trade financing. The survey also finds that bankers anticipate SMEs will face higher rates and stricter lending requirements. However, 9 out of 10 bankers say their institutions remain interested in working with SMEs, providing them services such as working capital loans, credit lines, advice on export deals and payroll and payments management.

Ecuador’s economic policy coordinator Diego Borja says his country will borrow $500m from the IDB to help finance its 2009 budget. But IDB officials say only that the multilateral has not approved a facility and is still “evaluating several projects to help the country achieve its development goals.” While a loan is being considered, it has not been vetted by the development bank’s board yet. “We are negotiating energy and transportation infrastructure projects, among others,” says the official, who declines to be named. UBS Pactual says it suspects the facility does not represent net new money for Ecuador, but rather would be used to roll over maturities due this year. The shop also says the government’s estimate of a $1.5bn fiscal deficit is too optimistic, adding that even if Ecuador secures the funds, its balance sheet is likely to reflect tight fiscal accounts for 2009.