Washington D.C., January 29, 2003
—The International Finance Corporation, the private sector financing arm of the World Bank Group, will provide a partial credit guarantee of *UVR 300 million to facilitate a domestic subordinated bond issue of UVR 1 billion by Banco Davivienda S.A., Colombia’s leading mortgage originator. IFC holds an option to purchase up to US$ 10 million in common equity shares.
This operation will bolster Davivienda’s capital base and facilitate its expansion in the recovery of the Colombian financial system. The financing will also assist Davivienda’s diversification strategy of entering into non-mortgage areas of business where more capital is required, and contribute to fund new investments in IT infrastructure.
The IFC partially guaranteed transaction is the first-ever subordinated debt issue in Colombia under the new tier 2 capital guidelines.
Karl Voltaire, IFC’s Director of the Global Financial Markets Department said, “Through this transaction, IFC will contribute to the transformation of the Colombian mortgage sector, as the former savings and loans institutions shift their focus from financing mortgages to origination and securitization, and transform themselves into universal banks.” Mr. Voltaire added: “IFC’s transaction will help develop a nascent market in subordinated debt securities in Colombia, which will provide alternative investment opportunities to institutional investors.”
Davivienda is the third largest Colombian financial institution by deposits with up to $1.5 billion, and the second largest by number of retail customers, with 2.1 million. Davivienda provides financial services to 45 towns and cities through a network of 227 branches and 3,855 employees.
Bernard Pasquier, IFC’s Director of the Latin America and Caribbean Department added, “Through this investment, IFC is showing its continued commitment to support the strengthening of Colombia's mortgage market, thus helping make housing available and affordable to the Colombian population. Davivienda, as a prime mortgage bank in the country, is also a showcase project for the transformation of the Colombian mortgage market, and complements IFC’s role in supporting the creation of Titulizadora Colombiana, the mortgage securitization company.
This operation is part of IFC’s overall strategy to further develop the domestic capital markets in Colombia. It follows on from IFC's previous two peso bond issues in Colombia in which IFC was the first-ever foreign issuer in the domestic market. Having successfully created awareness of IFC’s credit in the local market during the placement of these two previous bond issues, IFC is now focused on leveraging its own credit in order to further contribute to the development of the domestic bond market as well as help clients secure attractive long-term Colombian peso financing.
Colombia, the second largest recipient of IFC funds in Latin America in the fiscal year 2002, is becoming one of IFC’s key priorities in the region, not only through financing the private sector but also by working closely with the Colombian government and private companies to improve securities regulations and to develop private sector corporate governance codes. This fiscal year’s $219.75 million commitment in Colombia tripled IFC’s previous fiscal year commitment of $73 million.
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 $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s committed portfolio at the end of FY02 was $15.1 billion.
* UVR is
unidad de valor real
, a national currency which reflects the inflation adjusted Colombian peso.
