Mumbai, India, February 5, 2001
-- As part of its efforts to be more responsive to client needs and extend credit in local currency, the International Finance Corporation has launched its first structured partial credit guarantee on a local currency bond issue. The partial guarantee is for a 1.5 Billion Indian Rupees (about US$32 million equivalent), 10 year bond issued by Ballarpur Industries Ltd (BILT).
Nina Shapiro, IFC Treasurer, said that long-term local currency funds for non-AAA corporations are often not available in the capital or bank markets of developing market countries and this new product addresses that need. She added that IFC plans to offer partial credit guarantees on a global basis to other clients in the emerging markets for bond and loan transactions.
For this issue, IFC is guaranteeing two debt service payments on a rolling basis during the first four and a half years, and all debt service payments for the remaining five and a half years. CRISIL, the Indian affiliate of Standard & Poors, has rated the debt issue AA+, a four notch upgrade from BILT’s stand alone rating of single-A.
By offering a partial guarantee, rather than a full guarantee, IFC is able to mobilize additional funds by having investors invest in debentures in excess of IFC’s guaranteed amount. This co-financing between IFC and the Indian capital markets not only allows BILT to raise funds in excess of IFC credit being extended but allows BILT access to long-term funds to properly manage their assets and liabilities. BILT, the largest producer of writing and printing paper in India, will use the debt issue proceeds to finance their $126.1 million modernization and expansion program.
Mr. Bernard Pasquier, IFC director for South Asia, said the investment will establish a benchmark in the Indian domestic capital markets for a high quality, long maturity corporate asset that has the potential for secondary trading. He added that the investment will create a strong internationally competitive Indian paper company that can provide a steady stream of business to local wood pulp producers, reflecting IFC’s development strategy of poverty reduction in rural areas.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
