By Roger Hamilton
The IDB has done more than 55 syndicated loan operations since 1995 to complement lending from its own capital, working with people from companies and financial institutions from around the world. Following is a sampling of how these people view the experience.
More Than an Energy Project
Hunt Oil, of Dallas, Texas, was well aware of the technical and reputational risks when it formed Peru LNG in 2003 to carry out a $3.8 billion natural gas transport and liquification project.
“The IDB deserves a lot of credit for helping us plan ahead,” said Brian Swinford, Hunt’s vice president of finance. In fact, even long before the IDB’s own participation in the project was assured, the bank was working with Hunt on environmental and social impact studies and engagement with local communities.
“They didn’t have to take a risk by coming in early,” said Swinford. “But they said they wanted to be involved.
In June the loans for Peru LNG were signed totaling $800 million, half from the IDB’s ordinary capital and the other half via a B Loan raised from seven commercial banks.
“It was a very interactive process of engaging senior lenders and sponsors and guiding negotiations on structuring the financing,” said Alejandro Valencia, director of Société Générale Project and Energy Finance Group. “The IDB took a very proactive stance, and this was very important for reaching a consensus with the lender group.”
Support for Exporters
The Latin America Export Finance Fund, Ltd, run by the San Francisco-based Crecera Finance Company, works with 60 exporting client companies in Argentina, Brazil, and Peru. But the fund needed more capital to continue to meet its clients’ needs and to add new companies to its roster. In 2006, the IDB approved financing for the fund consisting of $25 million from its ordinary capital and $90 million in B Loan funding from seven private banks.
“The IDB saw us as not just a client, but as a part of its business,” said James F. Prusky, Crecera managing director. “The IDB operation was instrumental opening up new lending relationships outside of the three [South American] countries in which we operate.”
Drilling Down Into Capital Markets
Brazil’s energy sector is booming with major new offshore discoveries. The country needs drilling vessels, a specialty of Delba Drilling International Cooperatie U.A. In 2007, the company received financing for a semi-submersible rig with the help of an IDB A Loan of $100 million and a syndicated B Loan of $388 million arranged by West LB AG.
Thomas Friebel, chief of West LB AG’s loan syndications in Latin America, credited the IDB’s umbrella for relieving investors from provisioning requirements, making it possible to attract more funders.
Friebel also praised the IDB’s loan syndications for helping to develop local capital markets. “The capital markets in Latin America are dominated by several very large issuers,” he said. Diversification benefits West LB AG by creating room for commercial and investment banks to do more transactions, he said.
Focus On Smaller Countries
Mario Espinosa, Citigroup’s managing director of global loans for Latin America, worked with the IDB to put together a $210 million syndicated loan to refinance part of the debt of Costa Rica’s national power and telecommunications institution. This was in addition to the IDB’s A Loan for $181 million.
Citigroup has worked in Costa Rica for a number of years, but “having a B Loan program certainly opens up market for longer tenor transactions,” said Espinosa, “particularly for banks that have not had a presence there.”
The IDB’s role is particularly helpful for attracting European and regional banks to smaller countries, he said. Another big plus in working with the IDB is the multilateral’s close relationship with governments, their “umbrella,” which helps to lower provisioning requirements for lenders.
Stepping Into the International Arena
A total of $225 million in IDB A and B Loans gave Peru’s BVVA Banco Continental, S.A. crucial long-term financing to fuel its mortgage origination business and asset growth, according to Eduardo Avila, the bank’s then CFO and deputy general manager. The IDB provided guidance on the size of the operation, its terms and tenor, and secured an arranger.
The IDB’s umbrella had the effect of securing a financing term of five years. “This would have been impossible if we had tried to do it on our own,” said Avila. The operation also expanded Continental’s business horizons. “We found out that [working with the IDB in this operation] was an ideal way to get known outside of Peru,” said Avila. n