WASHINGTON, D.C., December 17, 2004
— The International Finance Corporation, the private sector arm of the World Bank Group, has invested $7.1 million to support the issue and placement of $63.5 million in mortgage-backed securities by the Baltic-American Enterprise Fund (BaLAEF). These are secured by mortgage loans originated in Latvia by the company’s mortgage program.
The transaction is the first securitization in Latvia, and the first residential mortgage-backed securitization ever to be issued in Central and Eastern Europe. IFC has actively participated in structuring the transaction and has also supported the issue by investing $2.1 million in the subordinated (Class B) certificates. The issuance of the B certificates provided credit support to the $60.5 million senior (Class A) certificates; the A certificates, rated Aa2 by Moody’s Investor Services, were placed with institutional investors in Europe and the United States. IFC also supported this issuance by purchasing $5 million of the senior notes.
The issuance is backed by a pool of dollar-denominated residential mortgages in Latvia. BaLAEF will use the proceeds of the transaction to originate new mortgage loans in the Baltics, helping the company achieve its growth plans and increasing the availability of funding for the housing finance in the region.
IFC was instrumental in supporting the company’s plans for this international issuance when it provided BaLAEF with a $50 million warehousing line in early 2003, helping expand its mortgage lending operations and prepare for secondary mortgage market activities.
Nina Shapiro, IFC’s Vice President, Finance and Treasurer, said, “This securitization is another example of IFC's growing structured finance efforts to develop the mortgage, banking and capital markets in transition countries. We are pleased to help BaLAEF introduce this new asset type.” Lee Meddin, Deputy Treasurer and Global head of Structured Finance at IFC added, “this transaction will be a benchmark for using innovative structures and best practice to help companies in emerging countries efficiently access funding from international capital markets.”
Jyrki Koskelo, Director of IFC’s Global Financial Markets Group, noted, “The transaction fits with IFC’s efforts to help establish and develop private secondary mortgage market companies. It also helps channel long-term financing from international investors in mortgage-backed securities to home mortgage borrowers, most of whom are middle- and lower-income families.” Edward Nassim, Director of IFC’s Central and Eastern European Department, said, “The project is part of IFC's work to develop and modernize the housing finance sector in the region, through investments in transactions that can provide a model to other investors.”
Richard Sheridan, CEO of BaLAEF, said, "We are pleased to be working with IFC on this innovative transaction. In addition to providing credit enhancement necessary to support the securities issue, IFC has helped BaLAEF conceptualize and structure the transaction. We look forward to continuing to work together to bring new instruments to the region.”
The mission of IFC (
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, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
