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IDB, AIG and ODEBRECHT sign Regional Surety Bond Facility

The Inter-American Development Bank, the American Home Assurance Company, a member company of American International Group, Inc. (AIG) and the Odebrecht Group, represented by Odebrecht S.A. and Construtora Norberto Odebrecht S.A. (CNO), today signed agreements establishing a US$400 million regional surety bonding facility for existing and future eligible projects undertaken by CNO and its operating subsidiaries in various IDB borrowing member countries in Latin America and the Caribbean. 

Under the facility, the IDB will provide a partial credit guarantee for an aggregate amount up to US$200 million to cover 50% of AIG’s net exposure under surety bonds (bid, performance, advance payment, retention, payment and/or maintenance bonds) issued on behalf of CNO and its subsidiaries.

“This facility represents a creative and innovative deployment of one of the IDB’s products, with a high development impact,” said Hans Schulz, Manager of the Bank’s Structured and Corporate Finance Department. “The IDB guarantee leverages significant amounts of contracting capacity, in multiples of the facility amount, and enhances the competitiveness of an important regional engineering and construction contractor.”

 “Facilitating the installation of high quality infrastructure and reducing the ‘infrastructure gap’ in our region is one of the IDB’s key missions and we are very pleased to have partnered with two key players in the field, AIG and Odebrecht, in designing and developing this facility,” added IDB project team leader Peter Stevenson.

“The surety bond market for Latin America and the Caribbean is characterized by a number of local players, with limited capacity, and a few international carriers, of which the AIG Companies are major market participants," said Rosemarie Bonelli, Senior Vice President and Global Head of American International Underwriters Surety Division, AIG’s international surety operation based in New York. "AIG has had a strong and well established surety relationship with the Odebrecht Group, and this facility will enhance AIG’s ability to support CNO’s growing business in the Latin America and Caribbean region.” 

“By working collaboratively with the IDB we were able to develop an innovative structure that addresses the unique needs of our client,” added Michael Yang, the surety division’s chief underwriting officer.

Vinicio Fonseca, who led the Odebrecht project team in designing the facility, said “CNO’s active participation in the infrastructure sector in the region continues to increase at a rapid pace, as evidenced by our growing backlog of projects, approximately US$10 billion as of June 30, 2007, compared to US$3.9 billion at the end of 2005. Gaining access to a reliable source of surety bonding capacity for our projects will enhance CNO’s capacity and competitiveness as a key player in the region’s infrastructure development.”

Construtora Norberto Odebrecht S.A. is the largest engineering and construction company in Brazil and a major one in the region. With approximately US$3.5 billion of total revenues in 2006, it is also the largest exporter of services in Brazil.

AIG, world leaders in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions.  AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance network of any insurer. AIG is one of the largest surety providers servicing the international surety markets. It has been CNO’s leading source of surety bonds for the last 16 years, issuing more than US$5.5 billion of surety bonds on its behalf.

The IDB is the leading source of long-term financing for economic and social development programs in Latin America and the Caribbean. Its Structured and Corporate Finance Department is responsible for loans and guarantees made directly to private businesses.

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