IDB Invest has introduced a US$1-billion securitisation transaction, the first of its kind for private sector investors to buy multilateral development bank (MDB) assets from Latin America and the Caribbean.
This innovative financial structure seeks to create a new MDB asset class for international investors. IDB Invest partnered with Santander and Clifford Chance as key advisors.
The new securitisation was launched at an event dubbed On the Road to Originate to Share, held at IDB Headquarters in Washington, DC. IDB President Ilan Goldfajn, CEO of IDB Invest James Scriven, CEO of Santander Ana Botín, and US Treasury Assistant Secretary for International Trade and Development Alexia Latortue all shared remarks.
The transaction, called Scaling4Impact, consists of securitising US$1 billion of IDB Invest’s portfolio. There is a tranched structure with an US$870-million senior tranche; a US$100-million mezzanine tranche, a portion of which was sold to international investor Newmarket Capital and the remainder insured by AXIS and AXA; and a US$30-million junior tranche retained by IDB Invest.
The securitised portfolio includes assets from 20 countries and 10 sectors, such as corporates, infrastructure, energy and financial institutions. The transaction will free up capital, creating up to half a billion in additional lending capacity for new development projects. Similar recent deals by IDB Invest suggest this could attract around US$4 billion from institutional investors through instruments like the 144a RegS B-bond in international debt capital markets.
“With our new originate to share business model, our strong ties with governments and the deep synergies between our private and public sector work, we’re uniquely positioned to attract private capital,” said IDB President Ilan Goldfajn.
“Through this landmark transaction, we are connecting development assets with global investors to scale impact in Latin America and the Caribbean.”
As one of the foundational steps in IDB Invest’s new originate-to-share business model, the transaction introduces a series of firsts, including the first securitisation focused on Latin America and the Caribbean MDB assets for private investors, as well as the first portfolio-level risk transfer by IDB Invest.
“This initiative marks a major step in IDB Invest’s transition to our new originate-to-share business model, aimed at mobilising capital and scaling impact through the private sector,” said James Scriven, CEO of IDB Invest.
“We are building a new MDB asset class to crowd-in investors seeking unique impactful investment opportunities in emerging markets.”
This groundbreaking transaction aligns with key G20 recommendations from the Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks (CAF), including financial innovation, balance sheet optimization through private sector risk transfers, enhanced engagement with rating agencies, and leveraging the Global Emerging Markets (GEMs) database to showcase MDB asset performance to private investors.
“Scaling4Impact is an incredibly exciting transaction and a new pathway for investor participation in development finance,” said Molly Whitehouse, managing director at Newmarket Capital and portfolio manager for Newmarket’s SRT strategy.
“We believe Scaling4Impact will catalyse other multilateral lending institutions to utilize the power of SRT transactions to improve their balance sheets while serving as a template for crowding in more capital from private market participants. We congratulate IDB Invest who have been terrific partners throughout this process.”
“AXA XL is proud to be a key risk partner in this innovative transaction,” said Scott Gunter, CEO, AXA XL.
“Our involvement in Scaling4Impact shows our commitment to working with global multilateral organizations like IDB Invest, leveraging our political risk and credit expertise to drive progress and protect what matters. We look forward to continued collaboration to drive meaningful development in emerging markets.”
“AXIS has a long and successful history of insuring multilateral development banks across a wide range of asset classes in developing countries,” said Mark Harwood, head of Capital Risk Solutions, AXIS.
“We are delighted and honored to be partnering with IDB Invest, together with Newmarket Capital and coinsuring alongside AXA XL, on this landmark $1 billion securitization transaction in support of IDB Invest’s mandate to promote and accelerate economic and social development across Latin America and the Caribbean.”
Scaling4Impact reinforces IDB Invest’s commitment to Latin America and the Caribbean and its role as an pioneer among MDBs in connecting development assets in the region.
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