Symbiotics in International Securitization Report

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Feb 2006
, February, 08 2006 - We have had an article published in ISR about the CDO we have done with Opportunity International in the Balkans. Because you have to register to view the article, here’s what it’s all about:

EIF CDO to kick start micro-finance funding

An innovative CDO emerged at the end of last year – through the European Investment Fund (EIF) and consultancy firm Symbiotics – that set a template for funding micro-finance institutions (MFIs) in emerging markets. Since micro-loans are typically only a few thousand euros each, MFIs have difficulty accessing the capital markets – yet there is high potential in terms of business productivity gains and job creation supported by such niche lending activity.

Dubbed Microfinance Loan Obligations, the €30m (US$36.3m) four-year deal is backed by loans originated by MFIs across seven Balkan countries and represents the first time that such institutions have achieved commercially-priced funding. According to Per-Erik Eriksson, the EIF’s senior structured finance manager, MFIs have previously been able to get cheaper funding from restructuring funds operating in the war-torn region. But with the region stabilising, these donors are likely to move elsewhere and so it was important to create a benchmark alternative financing.

The transaction relies on the first-loss risk being shared equally between a network of MFIs (Symbiotics also retained a portion of the equity). It is a compartment structure under Luxembourg law whereby the SPV can be used repeatedly: further tap issues are expected in April and October. “We’re currently looking to bring further deals later this year with a larger MFI network across different jurisdictions, this time backed by around 10 loans split across three tranches with a maturity of around five years. The first deal was a pilot so the proceed amount was small, but we’re now targeting around €100m,” confirms Eriksson.

He says that some MFIs in the region are migrating towards becoming SME lenders, which is helpful for the scheme: SME loans are around €10,000 to €20,000, making it easier to create the necessary volume as the funding needs of those lenders increases substantially.

EIF placed the senior notes (which accounted for 75% of the liabilities) with a single development bank, while Symbiotics marketed the junior notes to its network of specialist MFI investors across Europe and the US. Traditional institutional investors also showed interest in the deal and the arrangers hope that a broader range of accounts will participate in the next offering.



 

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