IFC s Debt Capital Market Strategy in Frontier Markets. The Nigerian Debt Capital Markets Workshop Lagos, October 2015.

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1 IFC s Debt Capital Market Strategy in Frontier Markets The Nigerian Debt Capital Markets Workshop Lagos, October 2015.

Overview of IFC IFC and the World Bank Group Owned by 184 member countries A member of the World Bank Group International Finance Corporation International Bank for Reconstruction and Development

2 Overview of IFC IFC and the World Bank Group Owned by 184 member countries A member of the World Bank Group International Finance Corporation International Bank for Reconstruction and Development International Development Association Multilateral Investment Guarantee Agency International Centre for Settlement of Investment Disputes Provides loans, equity, and advisory services to private sector in developing countries Provides loans to middleincome and credit-worthy low-income country governments Interest-free loans and grants to governments of poorest countries Guarantees of foreign direct investment s noncommercial risks Conciliation and arbitration of investment disputes The World Bank Group has adopted two ambitious goals: End extreme poverty: the percentage of people living with less than $1.25 a day to fall to no more than 3% globally by 2030 Promote shared prosperity: foster income growth of the bottom 40% of population in developing countries 2

3 Overview of IFC Overview Financial Strength of IFC IFC s Presence in Africa Total Commitments in FY 2014: $8 billion IFC serves its clients from three regional hubs and 16 local offices : Portfolio by Country: 1% 0% 2% 3% 3% 4% 18% 12% 1% 8% 13% 13% 22% Africa Region Nigeria South Africa Ghana Kenya Uganda Guinea Cote D'Ivoire Cameroon Mauritania Togo Other Countries Rwanda Dakar India 9.1% Nairobi Portfolio by Sector: India 9.1% 8% Financial Institution Group 39% Manufacturing, Agribusiness & Services 32% Johannesburg Infrastructure 21% CTT Industry Group 3

4 Domestic Capital Markets A Critical Infrastructure Pillar IFC views DCM as one of the 3 types of infrastructure critical to developing a country: physical infrastructure (road, power, water, telecommunications, etc.); social infrastructure (investing in their own people s health and education); and financial infrastructure (a platform for channeling national saving towards investments into economically vital sectors) Commercial banks ALM structures and increasingly Basel s requirements will restrict domestic banks activities to the short to medium term segment of the financing need of the economy. Capital markets are pivotal to funding long-term investments by mobilizing patient savings from institutional investors into transformational projects. IFC, though the joint World Bank / IFC advisory programs and the WBG s global practices, conduct markets assessments, inform and support institutional reforms towards adopting internationally accepted best practices, and contribute to improving the capacity of markets participants. IFC s Treasury sets up local currency bond programs under which it issues notes in a number of countries and facilitates corporate issuances to increase bonds supply, risk-reward options, and diversification options to investors in emerging markets. 4 4

IFC s DCM Strategy: Issuer and Investor Issuer

5 IFC s DCM Strategy: Issuer and Investor Issuer Supranational AAA Strategic Intervention Investor Corporate & Municipality Debt Strategic & Opportunistic Intervention Onshore Bonds Offshore Bonds Anchor Investment Credit Enhancement Onshore Partial Credit Guarantee Eurobond Securitizations 5

6 IFC s DCM Strategy Being mindful of the targeted impacts Besides the need to source funding for its local currency pipeline, IFC has striven through its capital markets outreach to achieve the following impacts: increase non-government bond issuances in domestic markets and develop credits layers from increased corporates and municipalities issuances; increase domestic and international investors participations in local currency issuances; improve the capacity of regulators and markets participants; and contribute to extending and deepening the yield curve and the credit culture. 6 6

7 IFC Issuances in Domestic Markets A Mean to a Purpose Description Programs under which IFC may issue debt instruments with maturities of 3 months or longer in various jurisdictions The Programs documentation and application are reviewed and approved by local regulators and the bond is listed on the local stock exchange IFC launched in 2012 a Pan African Domestic Medium Term Notes Program that initially included Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda and Zambia, and is currently being extended to the CFA franc zone and Nigeria Purpose raise local currency funding to finance IFC s project in local currency and help domestic companies avoid exposure to cross-currency risk; and/or develop liquid and deep bond market ensuring diversified sources of funding to meet business needs. Benefits to local markets Introduction of a new asset class of highest credit quality Setting a risk-free benchmark Diversification of domestic and foreign institutional investors Assist in accelerating development of non-sovereign sector of bond market Significant contribution to further development of the African financial markets 7 7

High Quality Local Currency Bonds Focus on Capital Market Development LATIN AMERICA Costa Rica Irazu Bond 2014 - CRC 5 million due 2019 Dominican Republic Taino Bond 2012 - DOP 390 million due 2017

8 High Quality Local Currency Bonds Focus on Capital Market Development LATIN AMERICA Costa Rica Irazu Bond CRC 5 million due 2019 Dominican Republic Taino Bond DOP 390 million due 2017 Colombia El Dorado Bond COP 225 billion due COP 125 billion due COP 269 billion due 2006 Peru Inca Bond PEN 50 million due PEN 100 million due 2008 Brazil Amazonian Bond BRL 200 million due 2011 AFRICA CFA Franc Kola Bond 2006 XOF 22 billion due XAF 22 billion due 2014 Morocco Atlas Bond MAD 1 billion due 2012 Rwanda Umuganda Bond RWF 15 billion due 2019 Nigeria Naija Bond NGN 12 billion due 2018 Zambia Zambezi Bond ZMW 150 million due 2017 Rwanda Twigire Bond RWF 3.5 billion due 2018 MIDDLE EAST Gulf Cooperation Council Hilal Sukuk USD 100 million due EUROPE Russia Volga Bond RUB 13 billion due 2017 Armenia Sevan Bond AMD 2 billion due 2016 Georgia Iveria Bond GEL 30 million due 2017 INDIA Marsala Bond 2013, 2015 INR 99 billion due 2016,2018, 2019, 2021, 2024 Maharaja Bond INR 6 billion due 2019, 2024, CHINA (ISSUED IN UK) Dim Sum Bonds CNH 2.75 billion due CNH 1 billion due 2019 CHINA Panda Bonds CNY 1.3 billion due CNY 870 million due 2013 Dim Sum Bonds CNH 150 million due CNH 500 million due CNH 500 million due 2017 MALAYSIA Wawasan-Islamic Bond MYR 500 million due 2007

9 IFC Investor Anchor Investments Basics Support to a bond issuance by committing to purchase a portion of the notes issued after due diligence and credit approval Sign a commitment agreement, and IFC s anchor investment can then be announced to the market during the roadshow Benefits to Investors IFC s public support of the issuance reduces pricing uncertainty Investors derive comfort from IFC due diligence and stamp of approval Benefits to Issuers Like a partial underwriting, an IFC anchor investment ensures a successful issuance IFC s public endorsement will help to boost subscription levels and reduce the clearing yield IFC can support the structuring and marketing process as needed 9

10 Corporate Debt Investments Anchor Investments (Case Studies) Nigeria (Eurobond) Issuer Issuance Status Issue Rating Issue Format IFC Anchor Investment Seven Energy Finance Ltd Senior Secured B- / B- (S&P, Fitch) 144A / Reg S Pricing Date 2 October 2014 Settlement Date 10 October 2014 Size Final Maturity USD 300 million 11 October 2021 final maturity Non-Call 11 October 2018 Re-Offer Price / Yield Coupon Listing Governing Law Bookrunners % / % p.a % p.a. Irish Stock Exchange New York Standard Chartered, Deutsche Bank, Morgan Stanley IFC Anchor Investment USD 50mm, amounting to 17% of the total issuance Pre-committed participation in public offering Highlights Seven Energy s inaugural high yield Eurobond issue First international Eurobond high yield issue by a non-listed Nigerian corporation IFC s anchor investment contributed to mitigating the execution risk amidst volatile markets Investor base diversification and international outreach with investors from Africa, the US, Europe and Asia 10 Zambia (Onshore Bond) Issuer Issuance Status Bayport Financial Services Ltd, Zambia Senior Secured Pricing Date 16 April 2014 Settlement Date 25 April 2014 Size ZMW 172m (approx. US$ 27m) Maturity 25 April 2018 Tenor Coupon Listing Arranger: Sponsoring Broker & Placing Agent: Governing Law: 4 years 2.50% over 182-T-Bill (Tranche 1) and 1.52% over 364 T-bill (Tranche 2) Lusaka Stock Exchange Barclays Bank Zambia, ABSA Stockbrokers Zambia Zambian Law IFC Anchor Investment ZMW 60m (approx. US$ 9.4m) Pre-committed private placement IFC s first anchor investment in Africa, and IFC s first ZMW denominated corporate bond investment Highlights Diversification of funding sources IFC supported the issuance by sharing its own issuance experiences, in close collaboration with the lead managers and legal advisors.

11 IFC Investor Credit Enhancement Partial Credit Guarantees Benefits to Issuers Access to wider investor base Paves the way for future issuances without enhancement Extend maturity Rating increase Benefits to Investors Reduced loss given default Reduced probability of default IFC due diligence and supervision Stamp of Approval Securitization Benefits to Issuers Allows highly rated securities to be created from less credit worthy assets Access to wider investor base Facilitates Rating increase Alternative form of longer term funding Can improve balance sheet management and potentially provide capital relief Benefits to Investors Reduced probability of default IFC due diligence and supervision Guaranteed Notes Investors Issuer IFC Guarantee Stand-by Loan Agreement IFC 11 Asset Portfolio Client (Asset Originator & Servicer) Backup Servicer Purchase Price Asset Portfolio Sale SPV ( Issuer ) Issuance proceeds Coupon IFC: Senior Notes The Client: Junior Notes

Other IFC s Local Currency Products Fixed or variable rate

an IFC s ALM swaps; Client Risk Management swaps (interest rate

existing or new foreign currency denominated liabilities back

12 Other IFC s Local Currency Products Fixed or variable rate loans from IFC denominated in local currency financed through an IFC s ALM swaps; Client Risk Management swaps (interest rate swaps or cross-currency swaps) which allow clients to hedge existing or new foreign currency denominated liabilities back into local currency; and Structured finance products (i.e., Partial Credit Guarantees, Securitizations, Risk Sharing Facilities) which enable clients to borrow in local currency from other sources. 12

13 Disclaimer This document has been prepared for informational purposes only, and the information herein may be condensed or incomplete. IFC specifically does not make any warranties or representations as to the accuracy or completeness of these materials. IFC is under no obligation to update these materials. This document is not a prospectus and is not intended to provide the basis for the evaluation of any securities issued by IFC. This information does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. Under no circumstances shall IFC or its affiliates be liable for any loss, damage, liability or expense incurred or suffered which is claimed to have resulted from use of these materials, including without limitation any direct, indirect, special or consequential damages, even if IFC has been advised of the possibility of such damages. For additional information concerning IFC, please refer to IFC s current Information Statement, financial statements and other relevant information available at

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