EBRD’s Loan Syndications Activities And …• EBRD COOs’ loan volume down 29% to USD 80 billion...
Transcript of EBRD’s Loan Syndications Activities And …• EBRD COOs’ loan volume down 29% to USD 80 billion...
EBRD’s Loan Syndications Activities And
Institutional Investor Partnerships
15th Annual Syndications and Co-financiers Meeting
London, 5th March 2013
Agenda
• What is the backdrop? What has improved in the region? What has not improved? What are the continuing challenges?
• Working with the market Basel III, deleveraging and its impact on lower tier credits EBRD syndications activity Who will provide the funds?
• Institutional Investors Partnership An initiative to promote non-bank investors
• Conclusions Why partnering with the EBRD continues to be a good thing
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Loan market key trends
• Global volumes for 2012 down 15% to USD 3.4 trillion
• EBRD COOs’ loan volume down 29% to USD 80 billion
• Russia loan volume down 19% to USD 41 billion Without Rosneft’s USD 16.8 billion acquisition loan, Russia volumes
would have dropped 53% to USD 24.2 billion
• Russia loan numbers down 34% to 52 transactions
• Sluggish global economic outlook and regulatory compliance indicate no significant loan pick-up in 2013, but probably no deterioration either
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Loan volumes in EBRD region
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Russia Turkey Kazakh Poland Ukraine Other
USD
bn
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Capital flows have (mostly) returned…
Transparency International CPI 2011*
0123456789
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2011 2007
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* Corruption Perceptions Index at www.transparency.org
Balkan grouping
CIS grouping
Score out of 10, where 10 = riskiest
World Bank Doing Business 2013
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Rankings out of 185 countries Ease of doing business Ease of obtaining credit
1. Singapore 4. Poland
46. Slovakia 12=. Romania
49. Kazakhstan 12=. Singapore
55. Poland 23=. Slovakia
66. Bulgaria 23=. Ukraine
67. Azerbaijan 40=. Bulgaria
71. Turkey 40=. Croatia
72. Romania 40=. Serbia
84. Croatia 53. Azerbaijan
86. Serbia 83=. Kazakhstan
112. Russia 83=. Turkey
137. Ukraine 104. Russia
Agenda
• What is the backdrop? What has improved in the region? What has not improved? What are the continuing challenges?
• Working with the market Basel III, deleveraging and its impact on lower tier credits EBRD syndications activity Who will provide the funds?
• Institutional Investors Partnership An initiative to promote non-bank investors
• Conclusions Why partnering with the EBRD continues to be a good thing
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Russian borrowers by %, 2011-2012: concentrated at top of the credit curve
60% captured by 10 names and 4 sectors
(50% in 2010-2011)
Other40%
Metalloinvest3% SeverEnergia
3%TNK-BP
3%Vimpelcom
3%
VTB Group4%
Rusal5%
VEB5%
Gazprom7%
Rosneft24%
Sberbank3%
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Cumulative additional funds EUR 156 billion
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1999 2001 2003 2005 2007 2009 2011
EBRD
AdditionalFunds
EBRD investments have attracted an additional EUR 156 billion from domestic and foreign investors
Loan syndications is a crucial element in mobilisation
Every EUR invested by EBRD mobilised EUR 2 in total project cost
EBRD – a catalyst for change
EBRD 2012 co-financing highlights
• Co-financed 80 projects in 20 countries for € 4.12 billion Varied instruments: B loans, bonds, credit lines, equity, parallel loans
• 16 projects in Russia for € 2.1 billion, approx 50% of total • Rosbank: only new money syndicated loan for a Russian
private bank in 2012 Heavily oversubscribed; loan nearly doubled
• Xacbank, Mongolia: 100% oversubscribed Attracting 1-, 3-, and 5-year money
• Atlantic Grupa: largest syndicated corporate loan in the Balkans in 2012
• First time Chinese bank participation in a RUB asset
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EBRD 2012 co-financing by country
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Total = EUR 4.12 billion
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EBRD 2012 co-financing by sector
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Total = EUR 4.12 billion
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EBRD syndications activity • B loan volumes up 18% to € 1.1 billion in 23 projects • Wide range of projects across ICA, Energy, Infrastructure, Financial
Institutions • What does the market seek?
Good quality sponsors (not only “blue chip”) Infrastructure assets
Power Logistics and transport
Financial institutions Of course a much harder market But appetite is still there for strong names and smaller banks with EBRD support
• The key requirements on all deals remain: Basel III friendly structures
Tangible and measurable security EUR still preferred over USD or LCY Tenors preferably ≤ 5 years (except infra assets)
Corporate lending rarely over 5 years (but this is not a hard rule) Infrastructure tenors have also tightened, eg 15-20 years now 10-12 yrs
• And … yes, it takes longer to syndicate a deal Banks are less predictable
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Financial Institutions
Russia
2012: USD 68.75 mm
`
Financial Institutions
Armenia
2012: USD 30 mm
Automotive
Russia
2012: EUR 14.5 mm
Food Retail
Romania
2012: EUR 210 mm
Property
Russia
2012: EUR 24.7 mm
Agribusiness
Russia
2012: USD 149.5 mm
Property
Russia
2012: USD 130 mm
Transport
Izmir Airport, Turkey
2012: EUR 145 mm
Financial Institutions
Romania
2012: EUR 11.4 mm
Power
Bares Wind Farm Turkey
2012: EUR 91 mm
Financial Institutions
Mongolia
2012: USD 46 mm
Agribusiness
Mongolia
2012: USD 57 mm
Financial Institutions
Russia
2012: USD 290 mm
Agribusiness
Croatia, Serbia, Slovenia
2012: EUR 231.6 mm
Manufacturing
Russia
2012: EUR 70 mm
Power
EDPR, Romania
2012: EUR 50 mm
Agribusiness
Ukraine
2012: USD 125 mm
Selected syndications closed in 2012 Russia
Other COOs
EBRD co-financier “league table”*
1. UniCredit Group 2. Raiffeisen Bank International 3. ING Group 4. Crédit Agricole 5. Erste Group 6. Nordea 7. Société Générale 8. Intesa Sanpaolo 9. BNP Paribas 10. Bayern LB
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* Cumulative active participations to end-2011
11. FMO Netherlands Dev. Finance 12. Cordiant Capital 13. Commerzbank 14. Bankia 15. Skandinaviska Enskilda Banken 16. Royal Bank of Scotland 17. Danske Bank 18. Fortis 19. VTB Group 20. ABN Amro Bank
The key banks remain engaged …
B lender concentration risk
0%
10%
20%
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2008 2009 2010 2011 2012
Rest of Participants Top 10 Participants
60% 70%
Alternative sources of co-financing?
• Promoting B loan funds Asset managers SWFs, pension funds Portfolio basis? Deal-by-deal?
• Institutional investors? Rated assets Bigger tickets than we can offer Due diligence More diversification/granularity
• Middle eastern banks? SEMED
• Chinese banks? Acquisitions Contracts Offtakes
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• The challenges are universal to the loan market, but especially so for those institutions operating at the lower end of the credit curve
• This means that all of EBRD’s differentiating factors, or USPs, need to be emphasised to catalyse the non-traditional sources of finance
• Promoting B loan funds Dialogue with asset managers
Seeking to capture massive liquidity of SWFs, pension funds, insurance companies
Portfolio basis, ie wholesale?
Deal-by-deal?
• Institutional investors Issues
Rating requirements
Ticket sizes
Due diligence
Diversification/granularity
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Alternative sources of co-financing?
Institutional Investors
Partnership
Agenda
• What is the backdrop? What has improved in the region? What has not improved? What are the continuing challenges?
• Working with the market Basel III, deleveraging and its impact on lower tier credits EBRD syndications activity Who will provide the funds?
• Institutional Investors Partnership An initiative to promote non-bank investors
• Conclusions Why partnering with the EBRD continues to be a good thing
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Objectives - IIP
Identify opportunities for partnering with Institutional Investors:
• Primarily (but not exclusively) Pension Funds and SWFs
• For the Bank’s lending and equity businesses
• Enabling the Bank to optimise the use of its limited capital
• Fulfilling its role of fostering market economies
Design and structure products suitable for such investors
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Mobilise funds from Institutional Investors (e.g. PFs, SWFs, Insurance Cos, AMs)
Rationale for IIP
Internal • Enable the Bank to continue growing its risk capacity, whilst managing its balance
sheet and capital prudently • Mobilise investors to the Bank’s region in line with its mandate
External • Global bank deleveraging: need to develop complementary distribution models • Tap growth of non-bank investor assets (e.g. PFs and SWFs) • Act as catalyst in creating transmission mechanisms between long term investors
and projects • Respond to G20 agenda: promote and provide long term financing
In line with external market developments:
– IFC Asset Management Company – FMO: creation of funds – Establishment of infrastructure funds by Asset Managers – EIB/EU project bonds – G20/G30/B20 initiatives
Attractive Equity and Loan portfolios
Debt Equity Resilient portfolio – low impairments and losses (very low impairments, negligible losses)
Established track record (550+ investments; 330+ exits)
Preferred Creditor status and Privileges Attractive returns (IRR 17%+, money multiples 2.2x)
Attractive (and stable) return (3.3%) Long term perspective (ability to invest and hold through the cycle)
Diversification Diversification
High Environmental, Social and Governance requirements (ESG) Unique origination capabilities across the region Deep understanding of local legal, regulatory and business environment Strict compliance standards
Strong alignment of interests
Institutional investors:
• Long term investments
• Return (in low interest rate environment)
• Stability of returns (predictability)
• Moderate risk
• Compliance with ESG standards
• Minimising reputational risk
How to match these aligned interests?
• Project bonds
• Private placements
• Securitisation
• Funds
EBRD:
• Long term focused
• Track record of delivering consistent returns (within acceptable risk parameters)
• Unmatched experience and knowledge of the region
• Upholds the highest ESG standards
• Lends credibility (and protection) to investments
EBRD plays a catalyst role
Agenda
• What is the backdrop? What has improved in the region? What has not improved? What are the continuing challenges?
• Working with the market Basel III, deleveraging and its impact on lower tier credits EBRD syndications activity Who will provide the funds?
• Institutional Investors Partnership An initiative to promote non-bank investors
• Conclusions Why partnering with the EBRD continues to be a good thing
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Working together – EBRD standards
• Sound banking Commercially-based pricing and covenants
• Additionality Provide tenor, local currency, structures, innovation Ability to provide loan, bond, equity, mezzanine finance
• Transition impact Corporate governance and integrity Environmental standards Reporting transparency and IAS
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EBRD provides the opportunity to co-finance quality projects
Working together: supporting your clients
• EBRD exists to help you to support your clients EBRD mandate to assist the private sector to finance projects
• Increase debt tenors and broaden the investor base Preferred creditor status
• Provide equity products to strengthen capital structure • Capacity to provide long-term local currency products
Both major and minor CEE/CIS currencies
• Engage EBRD early to leverage our resources effectively EBRD does not compete with the private sector but complements it
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The A/B loan structure: some advantages
• Governance Comfort for lenders
• Legal structures (eg secured lending in Russia) Single lender of record means a one-stop shop for documentation
• Due diligence Commercial, environment, integrity
• WHT exemption for borrowers*
• Tendering exemption for debt issuance by sub-sovereigns
• Longer tenors
• “Seal of approval” for clients
• Comfort to clients on NGO issues
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* Article 53, Treaty Establishing the EBRD
B loan portfolio performance*
• Total B loans committed: € 12.3 billion • Strong B loan portfolio performance
Gross write-offs/total B loans committed: 0.18% Net write-offs/total B loans
(after recoveries and write-backs) 0.14%
• These are cumulative data since establishment of EBRD in 1991 (not per annum data)
Key assumptions/provisos:
That a commercial bank writes off the same percentage of its B loan as the EBRD writes off on its A loan
Currency exchanges rates vary, and thus precise percentages may vary
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* To 31.12.12
Agenda
What is the backdrop? What has improved in the region? What has not improved? What are the continuing challenges?
Working with the market Basel III, deleveraging and its impact on lower tier credits EBRD syndications activity Who will provide the funds?
Institutional Investors Partnership An initiative to promote non-bank investors
Conclusions Why partnering with the EBRD continues to be a good thing
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EBRD’s Loan Syndications Activities And
Institutional Investors Partnership
15th Annual Syndications and Co-financiers Meeting
Thank you for your attention!
London, 5th March 2013
All loan market data sourced from Dealogic LoanAnalytics