Washington, DC, December 22, 2021—In one of the first emerging market transactions of its kind by a Development Finance Institution or commercial bank, IFC has issued a debt financing package based on Term SOFR. The $25 million debt facility will finance telecom infrastructure in Africa and will employ Term SOFR (Secured Overnight Financing Rate) to replace USD LIBOR as the benchmark reference rate for the US dollar variable rate loan.
In December 2021, IFC approved Term SOFR to replace LIBOR, the London Interbank Offered Rate, to ensure a smooth transition for new offerings in light of the US regulator's direction for all lending from January 1, 2022.
"IFC's first Term SOFR loan comes quickly following the Alternative Reference Rate Committee (ARRC) approval of Term SOFR, the IFC CME (Chicago Mercantile Exchange) license, and our senior management approval. Preparing in advance allowed us to be quick to the market. US dollar variable rate loans referencing Term SOFR are our new standard for hard currency lending in emerging markets. We look forward to doing many more such deals across the globe," said Tom Ceusters, IFC Director, Treasury Market Operations.
"IFC has been monitoring market developments and collaborating with partners in the financial industry—particularly with Multilateral Development Banks and other Development Finance Institutions—to track industry developments and develop best practices, including mechanisms for new loans and transitioning legacy transactions. We have now closed what we see as the first of many Term SOFR loans to be executed in emerging markets," Ceusters added.
IFC has conducted a comprehensive analysis of the impact of the LIBOR transition on the corporation from a lending, funding, accounting, operations, information technology, and legal perspective and is fully prepared to act in the best interests of our clients.
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information, visit www.ifc.org.