IDB offers new lending facilities to the region

The Inter-American Development Bank (IDB) says it has established a Flexible Financing Facility (FFF) that will enable Latin American and Caribbean countries to tailor loan terms and conditions to suit their individual needs.

It said that the facility will also allow countries to use hedges to manage interest rate and currency risks associated with their IDB debt.

The FFF, which will become fully operational on January 1, 2012, will replace the current platform for approval of sovereign guaranteed loans from the Ordinary Capital, the IDB's principal source of lending.

flexible solutions

"Countries' financial needs frequently change during the life of our loans. These flexible financing solutions will allow our sovereign borrowers to better manage risks, whether at a project level, in their broader lending programmes or as part of comprehensive asset and liability management strategies," said Edward Bartholomew, the IDB's finance department manager.

Under the FFF, borrowers will be able to divide loans into tranches or sub-loans with different characteristics, such as repayment schedules, currencies or interest rate bases.

The IDB said that the flexibility to choose different amortisation profiles will enable borrowers to select structures to best match project cash flows, such as uneven amortisa-tion schedules, and extended grace periods.

"Borrowers will also have the flexibility to manage interest rate and currency risk exposures of their IDB loans to facilitate asset liability management strategies. These options will be available at loan signature or throughout the life of loans, on part or full outstanding balances.

"The adoption of the Flexible Financing Facility is part of a broader agenda of reforms the IDB is carrying out to better meet the needs and expectations of its member countries, which last year agreed to the largest capital increase in the institution's history," the bank added.

- CMC