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The Inter-American Development Bank (IADB) closed its first A/B loan in favour of Brazilian bank Banco Industrial e Comercial (BiBanco) under its newly expanded trade facilitation programme (TFFP). The transaction demonstrates IADB’s innovation, flexibility and strength in supporting trade finance in Latin America.

The US$35mn loan will be used by the Brazilian bank to finance its trade finance activities.

The transaction is part of a targeting strategy to support and promote trade finance, and help mobilise funds from private lenders in times of uneven liquidity for middle-sized banks in the Latin America and Caribbean regions.

Under the terms of the financing agreement which falls under the IADB’s TFFP, IADB is lender of record and contributed US$15mn (A loan) to the facility, while a total of four participating banks, namely Citi, Wachovia, Commerzbank and Standard Chartered all contributed US$5mn each to make up the B portion of the facility. BiBanco has signed a US$50mn facility under the scheme, but the first transaction signed is for US$35mn, with the remaining funding to be drawn down later within a set time period.

The deal paid a margin of 1.15% plus Libor and both tranches carried a tenor of one year. This facility marks the first time the IADB has provided loans under its trade finance facilitation programme (TFFP).

IADB’s original TFFP programme was established five years ago and provides guarantees for trade finance transactions carried out by issuing and confirming banks in Latin America that are approved members of TFFP. To date, the IADB has approved US$1bn for 59 issuing banks, and these numbers are expected to increase.

“We continue to dedicate strong efforts to build the TFFP’s network and expand our coverage of loans and guarantees,” explains Daniela Carrera–Marquis, financial markets division chief of IADB’s structured and corporate finance department.

“We expect that 15 new issuing banks will be added to the programme during this year, further supporting the integration of Latin American and Caribbean countries and the rest of the world,” she adds.

To date, the programme has attracted 222 international banks, belonging to 87 banking groups, which have joined the programme as confirming banks. The TFFP network of confirming banks is spread throughout 53 countries worldwide.

“The TFFP was created with the aim of mitigating the impacts of economic crisis affecting the Latin American and Caribbean region, by providing guarantees and now, also trade loans, to its network of issuing banks,” notes Joao Vianei da Silva, TFFP senior trade finance officer at IADB.

He adds: “This new TFFP A/B loan feature is attracting even more the attention of international banks dealing with the region, since participating as B lenders, gives them the comfort of IADB’s preferred creditor status.”

Deal information

Borrower: Banco Industrial e Comercial (BiBanco)
Amount: US$50mn (first transaction US$35mn)
Mandated lead arranger: Inter-American Development Bank (IADB)
Participating banks: Citi, Wachovia, Commerzbank, Standard Chartered
Tenor: One year
Margin: 1.15%
Law firms: Machado, Meyer, Sendacz e Opice (Brazil); Landay & Leblang (New York)
Date signed: November 16, 2009