Dai Chang SONG Guarantees and Syndications Unit Private Sector Operations Department

5 June 2014

ADB, Manila

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I. Loan Syndication (B Loans)

A/B Loans Program:

A Loan : ADB’s direct lending from own resources

B Loan : Funded risk participation in an ADB loan to facilitate commercial cofinancing of ADB-assisted public or private sector projects.

ADB is the lender of record, without recourse to ADB for B Loans;

Commercial banks and other eligible financial institutions can participate in B Loans and share ADB’s Preferred Creditor Status (“PCS”);

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I. Loan Syndication (B Loans)

Commercial Banks / FI

Borrower

ADB as

Lender of

Record

A Loan

$100

B Loan

$100

A Loan

$100

B Loan

$100

$200

Participation Agreement Facility Agreement

own

resources

A/B Loan Structure

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On-shore Off-shore

I. Loan Syndication (B Loans)

Privileges and Benefits

B Loan enjoys the same privileges and immunities as ADB’s A Loans including:

exemption from restrictions on currency conversions and on remittance of interest payments and repatriation of principal;

exemption from withholding taxes;

reduced likelihood of rescheduling in the event of an external debt crisis in the borrowing country;

exemption from country provisioning requirements (where applicable).

*B Loans must be booked off-shore of the project/borrower.

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I. Loan Syndication (B Loans)

Other Benefits

project appraisal

supervision and monitoring of project implementation

loan administration services

flexibility: can combine guarantees or political risk insurance (“PRI”) for credit enhancement

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I. Loan Syndication (B Loans)

Eligible Financial Institutions

all reputable commercial financial institutions that are off-shore of the borrower/project country;

including, but not limited to commercial banks, insurance companies, pension funds, capital market participants, qualified institutional investors and other commercially-oriented entities.

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I. Loan Syndication (B Loans)

Documentation

B Loan documentation comprises of:

a direct loan agreement between ADB and borrower;

a participation agreement between ADB and participating B Loan lenders.

The relationship between a B Loan lender and the borrower is indirect, although the borrower is informed of the lenders’ identities.

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I. Loan Syndication (B Loans)

Administration

As lender-of-record, ADB administers B Loans on behalf of the participating B Loan lenders with the same standard of care it exercises for loans for its own account (A Loans).

In critical matters of importance, ADB does not act unilaterally but seeks the lenders’ views and consents prior to taking action as specified in the participation agreement.

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I. Loan Syndication (B Loans)

Workflow for B Loans

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Request to GSU

GSU market sounding

POSITIVE market response

Discussion on parameters - Amount, currency, tenor, pricing

expectations

Check with commercial banks on appetite, market conditions and risk-reward profile

NEGATIVE market response

I. Loan Syndication (B Loans)

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POSITIVE market response

At least 2 proposals from banks Request for proposals

Evaluation of proposals from commercial banks

Mandate negotiation

Mandated bank DD process

Finalize terms and conditions

Update marketing materials IM, Investor presentations,

Appoint legal counsels

I. Loan Syndication (B Loans)

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Launch syndication, Management presentation, site visit

Documentation, Investor Credit Process

Circulation of Documents

Allocation and Finalization of Documents

SIGNING

I. Loan Syndication (B Loans)

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NEGATIVE market response

Request for proposals

Restructure with credit enhancements and/or

parallel loans

Discussion with Borrowers

Resound the market based on restructured terms

YES NO

I. Loan Syndication (B Loans)

Recent B Loan Transactions

1. China Gas Holdings Ltd. - USD 100MM ADB B Loan Facility

Purpose: Investments in gas supply projects in the PRC

Participants: ANZ (MLA), CBA (MLA) and 11 commercial banks

2. China Water Affairs Group Ltd - USD 100MM ADB B Loan Facility

Purpose: Investments in water supply projects in the PRC

Participants: RBS (MLA), KDB (MLA) and 16 commercial banks

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I. Loan Syndication (B Loans)

Recent B Loan Transactions

3. China Everbright Environmental Energy Ltd - USD 100MM ADB B Loan Facility

Purpose: Investments in municipal waste-to-energy projects in the PRC

Participants: Mizuho (MLA) and 5 commercial banks

4. Indonesia Eximbank: USD 100MM ADB B Loan Facility

Purpose: Support government objectives on national energy conservations and facilitate SME exports and employment

Participants: ANZ, Bank of Nova Scotia, SMBC, Wells Fargo Bank (MLAs)

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I. Loan Syndication (B Loans)

Track Record

ADB has approved 60 B Loans for 60 projects in 11 countries, for a total of USD3.91 billion.

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II. “Blended” Finance with Eximbanks

What?

• Blending funds from Eximbanks/ECAs.

• Blending concessional funds from donors with private sector financing.

Why?

• To minimize project risks in projects in countries that typically cannot be done by public or private sector alone.

risks allocated between public, private sectors, and Eximbanks/ECAs.

• For demonstration effect, high developmental impact.

• Catalyze investments that otherwise would not happen.

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II. “Blended” Finance with Eximbanks

How?

• Harmonize approaches with private sector investments in low income/frontier markets.

• Eximbanks/ECAs support for sponsors/projects.

• Provide concessional financing to “fill the gap” in the market.

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II. “Blended” Finance with Eximbanks

Sample: “Blended” Finance Structure

2. Government

Lenders 1. ADB 2. Commercial Banks (with PRG and/or through B Loans) 3. Eximbanks/ECAs (parallel loans) 4. Concessional Funds

Equity Project Debt

Finance

Project Company EPC

Contract O/M

Contract

Project

1. Concessional Funds

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Investors 1. Public/Private

Investors

III. Annex

1. ADB Safeguard Policy Statement (2009)

http://www.adb.org/Documents/Policies/Safeguards/Safeguard-Policy-Statement-June2009.pdf

2. ADB Prohibited Investment Activities

forced labor or child labor;

production of or trade in weapons, munitions, and paramilitary materials;

production of or trade in alcoholic beverages, excluding beer and wine;

production of or trade in tobacco;

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III. Annex

ADB Prohibited Investment Activities (Cont’d.)

production, trade or any activity deemed illegal under host country laws or regulations or international conventions and agreements or subject to phase-outs or bans, such as

Pharmaceuticals, pesticides, herbicides

Ozone-depleting substances

Polychlorinated biphenyls and other hazardous chemicals

Wildlife or wildlife products regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora

Transboundary trade in waste or waste products

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III. Annex

ADB Prohibited Investment Activities (Cont’d.)

gambling, casinos, and equivalent enterprises;

production of or trade in radioactive materials, nuclear reactors and components;

production of, trade in, or use of unbounded asbestos fibers;

commercial logging or purchase of logging equipment for use in primary tropical moist forests or old-growth forests;

large-scale pelagic drift net fishing and fine mesh net fishing; and

production or activities that impinge on lands owned, or claimed under adjudication, by Indigenous Peoples, without full documented consent.

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Contact Person:

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Dai Chang Song Senior Guarantees and Syndications Specialist, OPSD dcsong@adb.org +632 632 6115

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