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

2

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

3

Loan volumes in EBRD region

0

20

40

60

80

100

120

140

160

180

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Russia Turkey Kazakh Poland Ukraine Other

USD

bn

4

Capital flows have (mostly) returned…

Transparency International CPI 2011*

0123456789

10

2011 2007

6

* Corruption Perceptions Index at www.transparency.org

Balkan grouping

CIS grouping

Score out of 10, where 10 = riskiest

World Bank Doing Business 2013

7

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





8

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%

10

Cumulative additional funds EUR 156 billion

0

30

60

90

120

150

180

210

240

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

12

EBRD 2012 co-financing by country

0

5

10

15

20

25

0

500

1,000

1,500

2,000

2,500Volumes (EUR mm) Number of projects

Total = EUR 4.12 billion

Volu

mes

(EU

R m

m)

Num

ber o

f pro

ject

s / p

artn

ers

13

EBRD 2012 co-financing by sector

0

5

10

15

20

25

0

500

1,000

1,500

2,000Volumes (EUR mm) Number of projects

Total = EUR 4.12 billion

Volu

mes

(EU

R m

m)

Num

ber o

f pro

ject

s / p

artn

ers

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

14

Financial Institutions

Russia

2012: USD 68.75 mm

`


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


Romania

2012: EUR 11.4 mm

Power

Bares Wind Farm Turkey

2012: EUR 91 mm


Mongolia

2012: USD 46 mm

Agribusiness

Mongolia

2012: USD 57 mm


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

16

* 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%

30%

40%

50%

60%

70%

80%

90%

100%

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

18

• 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

19

Alternative sources of co-financing?

Institutional Investors

Partnership

Agenda





20

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

21

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





25

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

26

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

27

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

29

* 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

30

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

ebrd’s loan syndications activities and …• ebrd coos’ loan volume down 29% to usd 80 billion...

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