CAF-banco de desarrollo de América Latina- Products and Services

A syndicated loan consists of a structure in which a financial institution exercises leadership in a credit operation and brings together a group of banks and/or other institutions (Participants), to respond to the needs of a client under the umbrella of a single loan. Under this structure, creditors share the same rights and obligations (pro rata).

The Corporación Andina de Fomento (CAF) – Participant’s relationship is founded on the pro rata principle, where the creditors of the client participate proportionately as partners in the rights and obligations they have undertaken under the loan agreement, based on the respective financial contributions made. This is how the creditors distribute income and expenses among themselves according to the corresponding share.

Syndicated loans can take various forms depending on the interest and the risk level of the lead financial institution (holder and/or administrator of the loan) and the Participants. Under this premise, syndicated operations in CAF can take the form of co financing or an A/B loan.

CO-FINANCING

With this product, CAF and the Participants jointly meet the borrowing needs of a client. In this manner, the financial conditions of the loan can be the same if CAF and these institutions agree on common conditions, or can simply be structured independently according to the interests of each one. A co-financing can be structured: (i) under a single loan agreement, or (ii) by separate agreements, with an agreement between creditors.

A/B LOAN

A/B Loans preserve the concept of pro rata, but change the capacity of each creditor to enforce those rights. The main change consists on CAF’s actions as sole holder of the whole A/B Loan (that is, the Lender of Record), which results in a higher level of control over its management by CAF.

As holder of the A/B Loan, CAF will:

Manage the credit in its entirety in relation to the client.
Finance the part of the loan (Tranche A) in which the Participants do not take part.
Sell a portion of the loan (Tranche B) to the Participants under participation agreements.
Act on its own behalf in Tranche A and have certain rights and obligations with the Participants of Tranche B.

The A/B Loans may vary in relation to how Tranche B is structured. This tranche can be structured as follows:

Sale of the total tranche to a group of Participants selected by CAF. It is worth noting that a bank can be selected as Co-Arranger who will represent the pooled interests of the Participants before CAF and the client.
Sale of the total tranche to a trust, whose sole purpose would be to issue securities to be sold to institutional investors.

CAF’S PURPOSE IN RELATION TO SYNDICATED LOANS	[ + ]
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Channel international resources and resources from institutional investors into high impact financing projects in Latin America and the Caribbean.
Maximize CAF’s added value by mobilizing third party funds in conditions not available to participants in CAF shareholder countries.
Offer financing alternatives for private sector investment projects in CAF’s shareholder countries.
Take a leadership position in the structuring of loans in alignment with private financial institutions, whether local (except for A/B loans), regional or international.
Minimize CAF’s exposure in an operation, while maintaining a high degree of control.

BORROWERS’ ELIGIBILITY	[ + ]
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Operations submitted by private or mixed companies will be considered eligible for financing.

In addition, operations with non-sovereign public sector companies can be made selectively.

Finally, for eligibility of the Borrowers in Syndicated Loans, the same eligibility criteria set forth in CAF’s internal policies will be taken into account.

PARTICIPANTS’ ELIGIBILITY	[ + ]
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Participants may be multilateral entities, development agencies, commercial banks, investment funds and other financial institutions which CAF may consider, after careful analysis and according to internal policies, and whether or not the operation to be financed is a co-financing or A/B Loan. Taking the above into account, CAF will apply the following criteria for the selection of Participants:

Reputation and financial stability.
Capacity to assume a commitment in the B Tranche should the operation become an A/B Loan.
Knowledge of and experience with the sector to be financed.
Client preference.
Competitiveness of the financial conditions for the operation.
Business relationship with CAF.

When there is a conflict of interest between the potential Participant and the client, the financial institution may be disqualified from negotiating a syndicated loan, whatever type it may be.

BORROWERS’ ADVANTAGES	[ + ]
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Possibility of ensuring total financing of the project in a single loan, lowering fixed costs and simplifying negotiations.
Access to longer financing terms, considering CAF’s multilateral character.
Establishing and deepening of business relations with first-class international banks.
Flexibility and responsiveness in the operations’ approval process.

PARTICIPANTS’ ADVANTAGES	[ + ]
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Benefit from CAF’s excellent relationship with its shareholder countries and its recognized presence in Latin America and the Caribbean.
Take advantage of CAF’s experience, its outstanding credit record and efficient portfolio management; and
Make use of exceptions from country risk provisions when participating in a CAF syndicated loan, pursuant to regulations set forth by the regulatory agencies of some countries.

A/B LOANS AND COUNTRY RISK	[ + ]
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Insofar as CAF is the Lender of Record of an A/B loan, the credits granted are expected to have the same privileges and benefits given to CAF by its shareholder countries for its normal operations.

CAF’s shareholder countries have agreed that CAF will be entitled, in the pertinent territory, to immunities, exemptions and privileges, which include:

Immunity of CAF’s property and assets to expropriation, investigation, seizure of property, confiscation of merchandize, distress, encumbrance, withholding, or any other form of forced seizure which may disturb the entity’s ownership of those assets. Likewise, the mentioned goods are also entitled to identical immunity from legal proceedings until final judgment is issued against CAF.
Free transferability and convertibility of CAF’s assets.
Inviolability of CAF’s records.
CAF’s property and other assets are exempt from all types of restrictions, regulations, and control measures or moratoria so that CAF may fulfill its purpose and functions, and perform its operations pursuant to the ´provisions set forth in the Articles of Agreement.
CAF is exempt from tax liens of any nature and therefore, from customs duties on its income, property and other assets. The bonds or securities issued by CAF are exempt from all taxes, including dividends or interest thereon under the following conditions: (i) if such taxes make a discrimination against said bonds or securities by the mere fact of having been issued by CAF; and (ii) if the sole jurisdictional basis of said taxes is in the place or the currency of issuance, or the place or currency in which said bonds or securities are paid or are payable, or in the location of any office or domicile of the Corporation.

TERMS	[ + ]
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Syndicated Loans require a minimum term of two years. Generally, longer terms increase CAF’s added value in the operation and facilitate absorption of the structuring fixed costs. For A/B loans, the term of Tranche A can exceed that of Tranche B if the characteristics of the project justify it, provided, however, that it is reasonable to incur the additional risks. The maximum term of Tranche A is determined according to the standards established by CAF’s credit policies.

SIZE OF THE LOAN	[ + ]
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The minimum amount of an A/B loan should be USD 50 million. The maximum amount is based on the project and the capacity to attract investors within the framework of the norms set forth by CAF. Generally, CAF has to maintain a minimum of 25% of the total amount of an A/B Loan, by financing the A Tranche.