WASHINGTON, D.C., January 13, 2000 —
In an innovation that breaks new ground for financing in developing countries, the International Finance Corporation has closed a securitization transaction based on receivables from the leasing of equipment. IFC recently closed the US$50 million transaction with Garanti Finansal Kiralama A.S. (Garanti Leasing), the biggest leasing company in Turkey.
This is the first international securitization of receivables from equipment leasing in an emerging market. The transaction has been structured as a limited recourse financing which will be paid down from a pool of lease receivables that has been assigned to the IFC. IFC provided about $7.2 million equivalent in four A loans for its own account, in euros and dollars; and about $43 million equivalent for the account of an offshore special purpose company, which is the sole participant in the IFC B Loan and has issued asset-backed securities to fund this participation.
Garanti Leasing will use the proceeds of the financing to improve asset-liability management and to originate new leases. "We are very proud of this securitization, the first of its kind, that will lead other financial institutions in Turkey to penetrate foreign markets by using on-shore assets," said Mr. Mahfi Eðilmez, Chairman of the Board of Garanti Leasing.
"Securitization is a powerful financing technology for emerging markets borrowers, who are constrained by corporate and sovereign ratings, to raise finance," said IFC Executive Vice President Peter Woicke. "This pioneering transaction with Garanti Leasing in Turkey will open the way to using this mechanism to raise capital in other developing countries where there is a need for long-term financing." Mr. Woicke noted also that the rigorous operations and management standards required by this kind of transaction can foster stronger financial institutions.
Apart from backing the loan with future revenue streams rather than corporate assets, the securitization was designed to protect lenders through over-collateralization, or assigning more receivables for repayment than are actually necessary to cover the loan. The transaction is also designed to be remote from the health – or even the bankruptcy – of the originating company because revenues from the assigned lease receivables would continue to accrue to the lender even if the company went out of business.
The asset-backed securities issued by the participant were rated Baa2 by Moody's Investors Service and BBB by Duff and Phelps Credit Rating International, and were fully underwritten by Rabobank International. Bear Stearns acted as advisors to Garanti Leasing.
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.
