Euromoney+Asia-Pacific+Syndicated+Loans+April+2009+FINAL

Document Sample
Euromoney+Asia-Pacific+Syndicated+Loans+April+2009+FINAL Powered By Docstoc
					Supporting Emerging Markets in Turbulent Times
                                            Ritva Laukkanen
                                                  Global Director
                             Syndications & Resource Mobilization

                                          Matthew Morrison
                                       Head of Syndications - Asia

                         International Finance Corporation


                                                          April 2009
                Supporting Emerging Markets in Turbulent Times




Overview:
 Impact of Crisis on Emerging
  Markets
 Role of IFIs: Addressing Challenges
  faced by Emerging Markets
 IFC’s Crisis Response Initiatives
 Conclusions



                     2
                                       Impact of Crisis on Emerging Markets




How did we get here?
 Sub-prime mortgage meltdown fueled crises in confidence and
  credit resulting in high market volatility and illiquidity, which
  led to a…
 Global financial crisis marked by market disruptions, bank
  failures and the need for massive global scale government
  interventions to try to stabilize and support markets
 Confidence in the international banking system has declined,
  major institutions have collapsed, countries around the world
  have entered into recession with decreasing trade and rising
  unemployment
 The global financial crisis has devolved into a global economic
  crisis, posing unprecedented challenges



                                 3
                                                       Impact of Crisis on Emerging Markets



            Significantly Lower Growth in Emerging Markets

                       2005        2006    2007        2008       2009 forecasted
            10.0

              8.0

              6.0

              4.0

              2.0

              0.0
                     World    EM     EAP   ECA       LAC   MENA      SA     SSA
                              Emerging Markets Real GDP Growth (%)

Source: World Bank

                                                 4
                                                                   Impact of Crisis on Emerging Markets



      Drastically Reduced Capital Flows to Emerging Markets
                        500


                        400


                        300
                                                                                            FDI
                        200                                                                 Private Creditors
                                                                                            Portfolio EQ
                        100
                                                                                            Public Creditors
                                                                                            Remittances
                          0


                       -100


                       -200
                              1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

                                 Capital Flows to Emerging Markets (US$ bn)

Source: World Bank GDF 2008; 2008, 2009 from IIF

                                                           5
                                                            Impact of Crisis on Emerging Markets


                           Difficulties Financing/Refinancing
                Developing Countries Suffer from Heavy Debt Burdens

                  3,000,000

                  2,500,000

                  2,000,000

                  1,500,000                                                       Half of the total is due
                                                                                    in less than 1year
                  1,000,000

                     500,000

                          0




                           Non-Local Currency International Bank Obligations by
                                      Developing Countries (US$ mn)


Source: BIS Quarterly Table 9a, December 2008

                                                      6
                                                                     Impact of Crisis on Emerging Markets



                         Significantly Increased Funding Costs
                                                                                              2000
                                                                                        bp

                                                                                              1800
                          Eastern Europe
                          CEEMEA                                                              1600
                          Latin America
                          Asia - Blended                                                      1400

                          Middle East
                                                                                              1200


                                                                                              1000


                                                                                              800


                                                                                              600


                                                                                              400


                                                                                              200
                Apr-08         Jun-08         Aug-08        Oct-08         Dec-08    Feb-09


Source: Bloomberg - Emerging Market Corporate Spreads

                                                        7
                                                              Impact of Crisis on Emerging Markets



              Steep Decline in Lending to Emerging Markets




Source: Dealogic Global Loans Review – 1Q 2009 4/1/2009


                                                          8
             Supporting Emerging Markets in Turbulent Times




Overview:
 Impact of Crisis on Emerging
  Markets
 Role of IFIs: Addressing Challenges
  faced by Emerging Markets
 IFC’s Crisis Response Initiatives
 Conclusions



                  9
            Role of IFIs: Addressing Challenges faced by Emerging Markets



Key Challenges
 Very limited financing available, particularly in:
    Trade
    Infrastructure
    Microfinance
    Agribusiness
    SME Lending
 Weakened financial infrastructure requiring
  recapitalization of banking sector
 Problems in both financial and real sectors expected to
  lead to major NPL problems, which require solutions to
  manage troubled assets




                              10
            Role of IFIs: Addressing Challenges faced by Emerging Markets



Role of International Financial Institutions (IFIs)
 Strong counter-cyclical operators; Experienced in
  numerous previous crises
 Strengthen and streamline cooperation and partnerships
  with all EM players – private sector banks and other
  investors, multilaterals, bilateral development banks
 Promote strong EM support by member governments
  through international forums (e.g., G-20)
 Proactively work with various stakeholders (private sector
  banks, IFIs, governments, international organizations) on
  crisis response measures, new products/initiatives




                              11
                Supporting Emerging Markets in Turbulent Times




Overview:
 Impact of Crisis on Emerging
  Markets
 Role of IFIs: Addressing Challenges
  faced by Emerging Markets
 IFC’s Crisis Response Initiatives
 Conclusions



                     12
                                   IFC’s Crisis Response Initiatives




Mobilization: IFC’s Key Approach
 Continued strong focus on mobilizing financing
  through syndicated B Loans
 Development of new approaches like unfunded
  risk participations (IFC funding entire loan;
  backed by guarantees from international banks)
 Expanded and streamlined co-financing with
  IFIs/DFIs through syndicated parallel loans using
  existing placement and agency platform
 Large-scale fund mobilization effort from
  shareholder governments through special
  initiatives




                         13
                                                        IFC’s Crisis Response Initiatives




    IFC B Loans: Increased Value in Today’s Market

                                    Loan Agreement      How do Borrowers benefit?
                                                •   Enables loans with longer tenors
                                                •   Exempt from withholding tax
                                                                Borrower
                                                •   Completes financial package
                                      A + B Loans
                                                •   Introduces new banking
                                                    relationships
           Participation
            Agreement




                           B Loan


                                               •    IFC’s “stamp of approval”
                                               •    IFC’s environmental and social
                                                    leadership

               How do Participants benefit?
•   Preferred Creditor Status
                 Participants
•   Recognition of IFC’s risk mitigation by regulators,
    rating agencies, PRI providers
•   IFC’s environmental and social leadership
•   IFC’s structuring and restructuring skills
•   Lower capital requirements under 14 Basel II
                                              IFC’s Crisis Response Initiatives




Syndicated Loans to IFIs/DFIs
 Historically, IFC has mobilized debt funding for its borrowers
  primarily through B Loans (over US$32 bn from over 400 banks)
 Most IFIs and DFIs are not eligible B Loan participants
 On a number of occasions, IFC and other IFIs have provided
  financing to a project in parallel, but operating independently and
  often duplicating processes
 Current environment calls for greater cooperation and presents an
  opportunity to increase efficiencies and streamline processes
 IFC acts as Arranger, working closely with the DFIs/IFIs; IFC acts as
  Agent (not as Lender of Record as in B Loans) post-signings




                                  15
                                                     IFC’s Crisis Response Initiatives


                        Phased Approach
                        Trade Finance
                                                             Pillars of Success
                        Infrastructure
1. Liquidity
                        Agribusiness                        • Mobilization &
                                                              working with
                        Microfinance & SMEs                   Partners
  2. Financial
                          Advisory Support
 Infrastructure                                             • Job Creation

                                                            • Continued Focus
       3. Capital            Bank Recapitalization            on Frontier
                                                              Markets &
                                                              Bottom of the
                                                              Pyramid
          4. Troubled
             Assets             Managing Troubled Assets



                                         16
                                               IFC’s Crisis Response Initiatives



Global Trade Finance Program (GTFP)
 GTFP was increased from US$1 bn to US$3 bn in response to the crisis
 Helps extend trade finance to underserved clients globally
 Provides partial or full guarantees to major commercial banks to cover
  the payment risk of local financial institutions
 Currently has 140 issuing / emerging market banks in 72 countries

Global Trade Liquidity Pool (GTLP)
 GTLP expected to be ~ US$5 bn; Leveraging IFC’s resources by bringing
  in other IFIs, DFIs & Governments (British, Canadian, Chinese & Dutch
  governments have already committed)
 Will leverage trade networks of major international banks; First MOUs
  (Standard Chartered Bank and Standard Bank) signed at G-20 meetings;
  Rabobank also plans to participate
 GTLP may also support specific sectors, e.g., agricultural exports



                                    17
                                            IFC’s Crisis Response Initiatives



Bank Recapitalisation Fund
 Fund will make subordinated loans and equity investments
  to EM private banks to support them through the crisis
 IFC has partnered with the government
  of Japan: IFC has invested US$1 bn,              Europe
                                                                              Sub-
                                                    19%
  Japan has invested US$2 bn                                                Saharan
                                                                             Africa
                                                                              33%
 Working to bring in other investors
 Fund operational with strong & globally
  diverse pipeline                              Asia
                                                23%

 Opportunity for commercial banks to                                       Latin
                                                                          America &
  provide debt financing to recapitalized                   Middle East
                                                             and North
                                                                          Caribbean
                                                                            10%
  banks                                                        Africa
                                                                15%

                                                       Current pipeline by region




                                18
                                            IFC’s Crisis Response Initiatives



Infrastructure Crisis Facility (ICF)
   ICF will bridge financing gap for viable private or PPP projects
   Facility aims to (i) ensure that vital projects in progress may be
    completed and (ii) enable continuation of some new project
    development
   Will include both debt, equity and advisory components to
    provide short- to medium-term financing for infrastructure
    projects, as well as advisory services for design or redesign of
    PPPs
   IFC plans to invest in equity and will aim to mobilize financing
    from other sources, primarily from shareholder governments
    (both developed & EM)



                                 19
                                        IFC’s Crisis Response Initiatives




Microfinance Enhancement Facility (MEF)
   MEF was jointly established by IFC and KfW to provide
    refinancing to 100+ microfinance institutions in 40
    countries
   MEF will address refinancing issues that microfinance
    institutions are facing due to the crisis
   Aim is to support lending to 60 million low-income
    borrowers in many of the world’s poorest countries




                              20
               Supporting Emerging Markets in Turbulent Times




Overview:
 Impact of Crisis on Emerging
  Markets
 Role of IFIs: Addressing Challenges
  faced by Emerging Markets
 IFC’s Crisis Response Initiatives
 Conclusions



                    21
                                                          Conclusions


Conclusions
   Current environment has left EM borrowers particularly
    vulnerable
   IFC and other IFIs are making serious efforts to address
    EM challenges
   IFC has proven track record as catalyst through B Loan
    Syndications; Broad-based participant network is highly
    valued and critically important today
   Expansion of relationships and strengthening
    mobilization of financing and other resources from
    other IFIs & governments is vital to maximizing impact
    and leveraging resources in face of unprecedented
    crisis




                             22
www.ifc.org/syndications




           23

				
DOCUMENT INFO