A/B Loans and Syndications

RECURSOS CONCESIONALES

A/B Loans and Syndications

 

The IDB provides a variety of financial products and works with clients to establish a wide assortment of secured instruments in dollars and local currencies. The Bank partners with commercial banks, institutional investors and other lenders to finance loans for corporations, banks, as well as public and mixed capital entities via the A/B loan program or other co-financing arrangements.

A/B LOANS

The IDB attracts banks and institutional investors as co-financiers through its A/B loan program. Under this program, the IDB offers the A portion of the loan from its own resources. The Bank partners with other financial institutions to provide the B loan.

Under the structure, the IDB is the Lender of Record in the transaction and acts as Lead Lender and Administrative Agent for the entire A plus B loan facility. Such structure offers benefits for both the borrowers and the financial institutions partnering with the Bank because it reduces the risk of the operation.

The IDB enjoys a special relationship with its borrowing governments: de jure immunity from taxation and de facto preferred creditor status. Therefore, no withholding taxes apply to debt service payments on IDB loans. As a result, financial institutions participating as B Lenders benefit from the same status. For borrowers, this reduced risk translates into lower borrowing costs.

Bank regulators from many European and other non-regional member countries recognize the special status of the IDB Group and exempt participants in B loans from compulsory country-risk provisions. The Basel II accord also recognizes that B loans contribute to mitigate or transfer convertibility risks.

Characteristics of A/B loans and syndications

  • No sovereign guarantee
  • Loan made up of two tranches:: A loan is provided by the IDB (lender of record) and the B loan is provided by international banks/institutional investors  through syndication
  • The program supports: project finance, warehousing lines, revolving credit lines, refinancing, and senior & subordinated loans
  • Are financed in LC (after meeting LCF conditions and subject to market conditions).
  • LIBOR rate: LIBOR + 50-350 bps (customized, market priced) plus credit spread.
  • Tenor: Up to 30 years (average: 10-15 years)