The IDB offers Ordinary Capital (OC) sovereign borrowers flexible financing solutions to further borrower’s risk management capabilities in projects, lending programs and asset-liability management strategies.

Flexible Financing Facility (FFF) Through built-in options in FFF loans, borrowers have the ability to tailor financial terms at approval or during the life of a loan. The FFF platform —LIBOR-based financing with embedded options—enables clients to manage currency and interest rate risks. In addition, to address project changing needs, borrowers can also customize FFF loan repayment terms to better manage liquidity risks.

Local Currency Financing (LCF) As part of currency risk management options offered by the FFF, borrowers can choose to obtain financing in their own currency or in alternative regional currencies at inception or during the life of a loan. In addition, the IDB offers guarantees in local currency (LC).

Management of Legacy Financial Products Borrowers can transform loans under legacy financial products into flexible, market-based financing. This added flexibility enables borrowers to manage their loan portfolio with the IDB to better suit their debt management programs.

FLEXIBLE FINANCING FACILITY (FFF)

A “Menu” Approach to the IDB Financial Offerings

Sovereign borrowers can choose from a menu of embedded options to tailor financial terms and conditions  of Ordinary Capital (OC) loans. The FFF also offers stand alone hedges to transform risk characteristics of all IDB obligations. These financial solutions address borrowers’ changing needs during the life of IDB loans. Options are available at any time during the life of a loan, on a partial loan amount, on the full outstanding loan balance, or on a loan portfolio level, subject to market availability.

Options offered under the FFF include:

• Local Currency Financing
• Risk Management Options of interest rate and currency exposures
• Flexible Repayment Options
• Management of legacy financial products

As of January 1st, 2012, the FFF was fully implemented and became the only platform for approval of all new OC Sovereign Guaranteed (SG) loans. Until January 1st, 2012, loans were approved as Single Currency Facility LIBOR . The options described above, if operationally feasible, will be considered upon borrower’s request.

• Proposal for a Flexible Financing Facility for Ordinary Capital for Sovereign Guaranteed Loan Operations  (PDF)

MANAGEMENT OF LEGACY FINANCIAL PRODUCTS

To broaden the financial solutions offered by the FFF, loans under legacy financial products can also be transformed into market-based products to better manage financial risks. Conversion of loans involves a high degree of customization to meet borrowers’ requirements and promotes valuable dialogue with the IDB.

The 2009–2010 Conversion Offer allowed borrowers to transform to market based rates US$32 billion of outstanding loan balances under two legacy products: Single Currency Facility (SCF) and Currency Pooling System (CPS) with adjustable rates. In addition, close to $10 billion of CPS loans were dollarized.

Contact us to discuss the financial solution that is most suitable to your needs.

The IDB offers guarantees to enhance financing of sovereign and non-sovereign borrowerswith or without sovereign counter-guarantees. IDB guarantees improve financial terms in project financing and capital market instruments and help promote investment in Latin America and the Caribbean.

General aspects of guarantees:

• Types of guarantees: partial credit guarantees or political risk guarantees.
• Uses of guarantees: enhancement of bond issues, project finance, asset-backed securities, securities backed by future flows, structured trade transactions.
• Amounts: calibrated to optimize impact on the underlying instrument’s rating.
• Tenor: for sovereign guarantee operations, maximum guarantee tenor of up to 20-years for policy-based interventions with a maximum weighted average life (WAL) of 12.75 years, and up to 25 years for investment operations with a maximum WAL of 15.75 years; for non-sovereign guarantee operations determined on a case-by-case basis.
• Fees: for sovereign guarantee operations, pricing neutrality applies between guarantees and loans; for non-sovereign guarantee operations fees are determined on a case-by-case basis.

Sovereign Counter-Guaranteed (SCG) Guarantees

Proposed Policy for a Flexible Guarantee Instrument (PFGI) for Sovereign-Guaranteed (SG) operations

The Flexible Guarantee Instrument (FGI) is the IDB’s guarantee policy for sovereign guaranteed operations. The FGI is a single platform that allows borrowing member countries, subnationals, and local governments to structure partial credit guarantees and partial risk guarantees, both for investment projects and policy based interventions.

For more information, see Flexible Guarantee Instrument for Sovereign Guaranteed Operations (PDF).

Concessional financing is offered to the IDB’s most vulnerable member countries. At present Bolivia,  Guyana, Honduras and Nicaragua qualify for some form of concessional financing that is provided via blended loans. Haiti benefits exclusively from grants.

Blended loans result from the combination of a Concessional-OC tranche with highly concessional financing terms  and a Regular-OC tranche with market-based terms from the Ordinary Capital (OC) that are disbursed pari-passu from a predetermined mix of Concessional-OC and Regular-OC allocation that varies by country based on its debt sustainability.

The introduction of the blended loan approach—after the IDB participated in the largest debt relief initiative for Latin American and Caribbean countries in 2007—allowed it to extend concessional financing for additional years. Blend financing replaced the Fund for Special Operations (FSO) traditional loan as well as the interest subsidies that were provided through the Intermediate Financing Facility (IFF). As a result of the merger of the FSO with the OC, effective January 1st., 2017, Blended loans are entirely financed with OC resources.

Concessional Financing: Terms and Conditions  (PDF)

Grants are non-reimbursable funds provided for technical cooperation programs. Some grants may be repaid to the IDB if the program eventually obtains a loan, either from the Bank itself or another source.

Grants can be financed by the IDB’s own financial resources or funds from third parties.

Depending on the source of financing, each grant carries its own terms and conditions.

For more information please refer to Grants .

For its non-sovereign guaranteed borrowers , the IDB provides private and state-owned companies and financial institutions in Latin America and the Caribbean with the financing necessary to help meet the region's growing demands.

Types of Financing

Financing is offered via a variety of structures  including loans, partial credit guarantees, grant financing and political risk guarantees. Loans are made on a project finance or on a corporate finance basis. Partial credit guarantees help improve placement of bonds with investors and enable clients to have access to better financing terms from domestic and foreign investors. Grant financing is available to private and state owned enterprises for pre-investment activities of selected highly developmental projects. Political risk guarantees are provided to eligible foreign debt investors for qualified investments in borrowing member countries.

General financing terms

• Loans carry fixed or floating interest rates and are priced according to existing market conditions, reflecting the overall characteristics of the underlying project and client.
• Partial credit guarantees carry fees or premiums that are market based and depend on the risk covered and market benchmarks.
• Grant financing requires counterpart financing.
• Political risk guarantees carry fees determined on a case-by-case basis depending on the risk covered and the nature of the guarantees’ structure.

For more information please refer to Non-Sovereign Guaranteed Loans .