Bogotá/ Washington, DC, January 19, 2007—
The International Finance Corporation, the private sector arm of the World Bank Group, has provided Colombia’s Banco Davivienda with financing to support its acquisition of Granbanco (formerly Bancafe) and to strengthen its capital base.
IFC’s $240 million financing package consists of a direct equity investment of $75 million and $165 million in subordinated debt. The subordinated debt is the first financing of its kind and includes $65 million for IFC’s account and $100 million syndicated to international banks, pension funds, and insurance companies. The subordinated debt will be considered part of Banco Davivienda’s capital base.
Banco Davivienda, one of the leading financial institutions in Colombia, has been an IFC client since 1973. This new financing package will bolster and diversify Davivienda’s loan portfolio, creating Colombia’s number one bank in mortgage and retail lending and its number three bank in corporate loans. IFC’s new equity investment will increase its participation in Davivienda from four to nine percent.
Efrain Forero, Chairman of Banco Davivienda, and Roberto Albisetti, IFC’s Manager for Colombia, signed IFC’s financing agreement today in Bogotá.
“Banco Davivienda is a long-standing IFC client with a demonstrated commitment to Colombia’s economic and social development, as well as a strong financial track record, clear vision, and long-term strategic planning,” said Roberto Albisetti at the ceremony. “IFC’s support to Davivienda is consistent with our strategy in Colombia, as it will support the expansion and strengthening of a locally owned bank and will help deepen the country’s financial sector,” he added.
Davivienda’s Chairman Efrain Forero added, “ The long-term business partnership between Davivienda and IFC has allowed Davivienda to continue its growing process and expand its geographical coverage through its diversification strategy, becoming the leader in retail banking and the third largest bank in the country.”
In 1999 Bancafe, the forerunner of Granbanco, was taken over by the government. It has since been completely reshaped through new management. In October 2006, Banco Davivienda won the privatization auction for Bancafe with an open bid for 2.21 billion Colombian pesos (about $918 million).
Banco Davivienda will fund the remainder of the acquisition price with new equity injections from existing shareholders, internal liquidity, and senior debt. This is the first cross-border syndication of Tier 2 capital for a Colombian bank and the first syndication of its kind for a multilateral. It is also a strong vote of confidence from international investors, in both Davivienda itself and Colombian financial assets in general.
With almost $7 billion in assets post-acquisition, the enhanced Banco Davivienda will be able to expand its operations to 132 cities through 236 branches. It will serve almost 4 million clients.
IFC’s Partnership with Banco Davivienda
IFC’s first investment in Banco Davivienda took place in 1973 with an equity investment of 20 percent. In the 1990s, Davivienda was a founding partner, along with IFC, of Titulizadora Colombiana, a secondary mortgage securitization company. In 2002, IFC provided a partial credit guarantee of up to UVR (unidad de valor real, a notional currency that reflects the inflation adjusted Colombian peso) 300 million to facilitate a domestic subordinated bond issue of UVR 1 billion by Banco Davivienda. In 2005, IFC committed to Banco Davivienda a $35 million standby subordinated loan followed by a $25 million equity investment, to support its expansion and consolidation through the acquisition of Banco Superior.
At the onset of Colombia’s financial and mortgage sector crisis in the late 1990s, Davivienda played a leading role in the transformation of the Colombian mortgage sector, as the former savings and mortgage lending institutions (also known as CAVs) shifted their focus from financing mortgages to origination and securitization, at the same time transforming themselves into full-service banks. Banco Davivienda is also one of the founding partners of Titulizadora Colombiana, a secondary mortgage securitization company, along with IFC and others.
About Banco Davivienda
Banco Davivienda with Granbanco is the third largest financial institution in Colombia with assets of $8.06 billion, deposits of $6.02 billion and a net loan portfolio of $4.9 billion as of December 31, 2006. The Bank has an extensive nationwide network with 540 branches in 52 cities.
Duff & Phelps Colombia assigned Davivienda a long-term, local currency rating of AAA, a level assigned to entities of the highest credit quality. Davivienda also was assigned a short-term, local currency rating of DP1+, also the highest level. BRC Investor Services also rates Davivienda’s long-term credit-worthiness AAA and rates its short-term credit-worthiness BRC 1+, the highest rating the company offers.
IFC in Colombia
The financial sector continues to be a priority for IFC in Colombia, with a special focus on finance and microfinance for housing, as well as the strengthening of local capital markets and corporate governance. IFC’s strategy for Colombia also focuses on increasing support to sectors that are central to the country’s financial development within the framework of free trade agreements. This includes the financing of infrastructure projects involving public-private partnerships, such as the expansion of ports, roads, and airports, as well as support to logistics companies. IFC also aims to finance Colombian oil and gas companies, in particular those looking to expand across the region.
IFC’s total portfolio in Colombia as of year end 2006 was over $506 million. Since Colombia became a member of the IFC in 1956, the Corporation has provided $1.7 billion to its private sector, including syndicated loans for a total of $500 million.
About IFC
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit www.ifc.org.
