IDB Finance
What is the FFF?
The FFF is the platform for approval of all new Ordinary Capital (OC) Sovereign Guaranteed (SG) loans starting January 2012, replacing the Single Currency Facility (SCF) and Local Currency Facility (LCF) products. For existing loans under legacy products such as SCF-adjustable, Currency Pooling System (CPS) adjustable and fixed, Dollar Window, borrowers also have the ability to transform financial terms and conditions into market-based features.
Until the FFF is fully implemented in January 2012, loans will continue to be approved as SCF- LIBOR loans. Options, if operationally feasible, will be considered upon borrower’s request.
How are loans priced under the FFF?
Pricing of FFF loans continues to be the same as SCF-LIBOR loans and is based on a pass-on approach. The lendingrate is composed of (i) variable SOFR daily overnight compounded rate in arrears plus (ii) IDB funding margin relative to SOFR, plus (iii) IDB OC variable lending spread. Cost is on a pass-through basis plus applicable lending margin and fees.
What kind of embedded risk management options are offered under the FFF?
Subject to market availability, the FFF offers interest rate options, currency options, flexible repayment options and stand alone hedges. Please see risk management options.
Are my existing loans affected by the introduction of the FFF?
No, existing loan terms and conditions remain unchanged. At borrower’s request and subject to market availability, certain FFF risk management options may be available for existing loans. This will require contract modification to incorporate such options.
What are the terms and conditions of a standard FFF loan?
A standard FFF loan carries a LIBOR-based interest rate plus funding margin and lending spread. Typically, Investment Loans have a 25 year maturity while Policy Based Loans (PBL) 20 years. Both types of loans typically have a 5.5 year grace period and are amortized in equal semi-annual payments.
What loan repayment options are available under the FFF?
The standard FFF loan carries a straight line amortization schedule. Other repayment options include bullet repayment structures, extended grace periods, uneven amortization schedules and shorter repayment periods. These options are available provided that the Weighted Average Life (WAL) of all tranches does not exceed the loan's original WAL and that the loan’s final maturity, as approved, is not exceeded.
What is the Weighted Average Life (WAL) of a loan?
The WAL is a tool that allows comparison, from a cash flow perspective, of the equivalence of different types of amortization schedules. For example, a straight line amortizing loan can be equated to a bullet loan provided that amortization schedule of each is such that the WAL is the same for both. Please see Flexible Repayments.
What is the WAL of a standard FFF loan?
The WAL of a standard FFF Investment loan is 15.25 years; for PBL loans it is 12.75 years. Please see Flexible Repayments.
What is the difference between embedded risk management options and stand alone hedges?
Embedded risk management options are built in hedges in standard FFF loan contracts that, subject to market availability, can be selected by the borrower. Stand alone hedges are offered on single loans or at a loan portfolio level and are documented using market techniques via an ISDA Master Agreement executed with the IDB.
Are there any fees applicable to the new options offered under the FFF?
Yes, transaction fees apply.
What is loan tranching?
Loan tranching refers to the ability to create sub loans within a single loan to facilitate project cash flows management. Each tranche can carry different financial structures, such as currency, repayment schedule, and interest rate basis. Loan tranching is subject to the WAL of all tranches not exceeding the loan’s original WAL and the loan’s final maturity, as approved, is not exceeded. Please see Flexible Repayments.
What is a conversion?
A conversion refers to the borrowers' ability to modify, over the life of the loan, the terms—interest rate basis, currency, amortization profile—to better suit project cash flows and/or manage risk exposures.