Washington DC. November 13, 2001
—The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has issued a partial guarantee on a local currency bond issue in Russia, as part of its efforts to be more responsive to client needs, extend credit in local currency and develop local financial markets.
The partial guarantee is for 300 million Russian Rubles (about US$10 million equivalent) on 500 million of Rubles bonds with a final maturity of 3 years launched by the Russian Standard Bank (RSB). The issue is being managed by Troika Dialogue, a Moscow-based investment bank, and the bonds will be listed on the Moscow Interbank Currency Exchange.
RSB is developing a substantial retail lending operation in Moscow and in the regions. In order to fund this expansion it is strategically important for the Bank to establish itself in the domestic capital markets to access sources of longer-term local currency financing.
By offering a partial guarantee, rather than a full guarantee, IFC will be able to mobilize additional funds by having investors purchase bonds in excess of IFC’s guaranteed amount. IFC’s support will provide the credit enhancement necessary to allow RSB to tap the markets initially, but will also enhance its ability to access debt markets on its own. This way, investors will be comfortable taking a portion of RSB credit risk under the partial guarantee structure.
Nina Shapiro, IFC Treasurer, said that longer-term local currency funds for non-AAA corporations are not usually available in the capital or bank markets of developing countries and this new product addresses that need. She added that IFC is planning to offer partial credit guarantees on a global basis to other clients in the emerging markets for bond and loan transactions.
Edward Nassim, IFC director for Central and Eastern Europe, said this investment will
create a standard in the Russian domestic capital markets for high quality banking debt paper that has the potential for secondary trading. He added that it will provide an instrument for local currency funding , where other sources, such as deposits, are limited and of very short term.
The RSB guarantee is IFC’s third investment in the financial sector in Russia in the fiscal year 2002. To date, IFC’s held portfolio in Russia, including amounts mobilized from commercial banks, is approximately $264 million. IFC’s program for Russia continues to be active with investments in projects of about $60 million for the financial year.
IFC's mission (www.ifc.org) is to promote sustainable private sector investment in developing countries, helping to 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.
Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC's committed portfolio at the end of FY01 was $14.3 billion.
