# Presentation: 448470

## Integrating Multilateral Development Bank Financing into a Global Business Strategy 

- Strictly Private and Confidential

## 1.  Citigroup Target Market

## Citigroup’s Target Market Strategy

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**Investment Banking**
- Provides financial advisory and capital raising services to top tier corporations, FIs and governments globally

**Global Corporate Banking**** **Provides financial and advisory capital raising services to top tier MNC corporations, FIs and governments globally

**Public Sector Group**
- Works with public entities on key initiatives, such as infrastructure, pension reform and liability management

**Emerging Markets Corporate Banking**
- Focused coverage of top tier emerging market corporations, bringing global access to financing

**Strong commitment to emerging markets **
**Leading provider of financing and advice for infrastructure projects**
**Expanding to new market segments: SME and microfinance**
**Strategic focus to leverage global presence and transfer expertise and best practices**

**Commercial Business Group**
- In 20 countries, Middle Market/SME coverage - offers leasing, banking and real estate products and services

**Consumer Banking**
- Provides consumers with diverse products including banking services, credit cards, loans and insurance

## Citigroup’s Export and Agency Finance Group

- EAF serves as an emerging markets corporate finance portal to provide structured solutions to facilitate trade and investment flows through:
- Debt arranging solutions related to:
- Cross border investment and trade
- Acquisition financing/refinancing, in conjunction with new capital projects
- Defeasance of political and credit risk
- Advisory services
- EAF manages a diversified portfolio of assets involving some form of agency support worth over $14 billion.  In 2006, EAF closed 82 transactions totaling financing of $10.6 billion

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## Partnerships – Private Sector/Public Sector

- Capital Market Issuance/Market Maker
- Citigroup is a top tier underwriter of debt issuances – international and local – by multilateral agencies.
- Citigroup has a market presence in key emerging markets providing a view into local markets – rates, currency derivatives.
- Citigroup’s extensive coverage model reaches clients in emerging markets that are otherwise underserved by bank and/or capital markets – these clients often need capital to grow.
- Co-financing with MLA private sector groups. The opportunity is in partnership to provide solutions.
- Risk Mitigation – via partial risk support or structuring subordination
- Citigroup’s Banking Services
- Available worldwide – best in class for cash management, trade services
- Project cash flow management; agency & trust

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## 2.  Multilateral Agency Financing Structures

## Multilateral Agency Financing Structures

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| Product | A better solution... |
| --- | --- |
|  |  |
| A/B Loans and Co-Financing Structures | Leverage private capital markets with private sector lead arrangers
Grant commercial banks more rights in participation agreements to provide quality comfort in structured deals
Provide loans in local currency, without crystallization upon default |
|  |  |
| Partial Credit Guarantees | Provide support in local currency
Leverage private sector capital markets experience and distribution sources |
|  |  |
| Synthetic Local Currency Financing | Provide guarantees in local currency without crystallization upon default |
|  |  |
| Tranched Loss Structures and Mezzanine/Equity Financing | Offer equity or subordinated debt partnerships to private sector. Tranche C investors are becoming more numerous. |
|  |  |
| Risk Sharing Facilities | Create format for quick decision making
Standardize agreed documentation |

## 3.  Examples of Agency and Citigroup Collaboration

## Nicaragua Sugar & Compañia Licorera de Nicaragua, S.A.

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**Nicaragua Sugar & Compania Licorera de Nicaragua , S.A.**
**US$ 75MM Agency Financing Solution**
*Borrower:** **	*Nicaragua Sugar Estates Ltd.
- 	Compania Licorera de Nicaragua, S.A.
*Facilities:** **	*_Nicaragua Sugar:_ US$62 million as follows:
- 	IFC A Loan: US$25 million, 10-year amortizing term loan
- 	IFC B Loan: US$11.5 million, 8-year amortizing term loan
- 	Parallel Commercial Bank Facility: US$18 million, 8-year amortizing term loan
- 	DEG Facility: US$7.5 million, 10-year amortizing term loan
- 	_Compania Licorera:_ US$13 million as follows:
- 	Parallel Commercial Bank Facility: US$13 million, 8-year amortizing term loan
*Purpose:****  ******	***Increase ethanol production capacity and     refinance existing debt
- 	Enhance Flor de Cania rum brand
*Lenders:** **	*Citigroup, IFC, DEG and a syndicate of regional commercial banks
*Closing Date:****	***October 27, 2006
*Citigroup Roles:   *Lead Arranger on all facilities and Joint Lead Arranger with IFC on the A/B Loan

**Transaction**
- The Facilities were structured to finance the long term strategic plan for both companies to produce sugar and ethanol at Nicaragua Sugar and to expand the Flor de Cania brand at the Licorera. As many multilaterals and development finance institutions do not finance spirits by policy, commercial banks were given the option of entering an IFC B loan to NSEL or to lend to NSEL and CLNSA outside of the umbrella.
- Under the secured export financing structure, eligible sugar and ethanol contracts and their receivables were pledged for the benefit of the lenders with payment made to an offshore collection account in New York.
- It was a major financing in Nicaragua in an environment of political uncertainty. The MLA umbrella helped.
- Deal execution was fast and efficient despite the complex structure and environmental issues (category B).
**Market Reaction**
- Attractiveness of the structure and the NSEL / CLNSA credit resulted in very competitive terms regarding tenor and pricing provided by the  financing institutions.  The deal was oversubscribed.
**Highlights**
- As a result of a tight structure and an off-shore receivables security, very competitive pricing was achieved from the financing markets.
- The Official Agencies provided longer tenor and lower pricing than would be possible in either the bank or capital market and an important “halo” effect.

**Notes:**
Example of A/B Loan and Co-financing

## Financiera Compartamos, S.A., Mexico

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**Financiera Compartamos (Mexico)**
**MXN500 million Mexican Peso **
**Local Bond Program**
*Borrower:** **	*Financiera Compartamos, S.A. de C.V.   (“Compartamos”)
*Facility:*	Approximately US$ 45 million, MXN 500 million local bond program, partially guaranteed by the IFC.
*Purpose:*	To fund the expansion needs of the company’s microfinance portfolio
*Tenor:** **	*5 years
*Rating:** **	*AA local rating by Standard & Poor’s and Fitch Ratings
*Closing Date:****	***October 2005
*Citigroup Roles:   *Sole Lead Arranger

**Transaction**
- Compartamos is the largest microfinance company in Mexico.  Its target market is the very low-income end of the population, which has no access to banking services.  Compartamos supports the entrepreneurial efforts of thousands of clients – 94% of them women – primarily in rural communities.
- The structure used a 34% guarantee from IFC to enable the five-year bonds to receive an enhanced AA local rating by the local affiliates of Standard & Poor’s and Fitch Ratings.
- The structure of the partial guarantee was designed to attract Mexican institutional investors including mutual funds, pension funds, and insurance companies in order to raise larger sums of capital.
- The first tranche of the program, for MXN 190 million, approx. US $16 million, was closed on July 30, 2004 and the second tranche MXN 310 million, equivalent to US $36 million in October 2005.
- The financing was the first Mexican Peso transaction supported by the IFC.
**Highlights**
- First IFC partial guarantee supported deal in Mexican Pesos.
- Milestone transaction for the microfinance industry.
- Developed investor knowledge of microfinance industry.
- Citigroup/Banamex and the IFC helped Compartamos diversify funding by tapping new sources.

**Notes:**
Example of partial credit guarantee

## ISAGEN, S.A., Colombia

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**ISAGEN S.A  (Colombia)**
**US$250 million in Financing with Guaranteed and Insured**
**Tranche of US$212 million **
*Borrower:** **	*Isagen, S.A. E.S.P.
*Project Size:*	US$250 million
*Sponsor & *
*Guarantor:**	*Republic of Colombia
*Purpose:*	Proceeds used to fund ISAGEN’s CAPEX and refinancing plan including modernization, maintenance and reconstruction of existing facilities and construction of new facilities.
*Facilities:** **	*Tranche A: $212 million 20-year, Sovereign Guaranteed and OPIC Insured Facility
- 	Tranche B: US$ 38 MM 5-year clean bank facility
*Lenders:** **	*Tranche A: Power Finance Trust Limited                  Tranche B: Citibank, N.A.
*Closing Date:****	***December 22, 2005
*Citigroup Roles:   *Sole Financial Adviser, Sole Mandated Lead Arranger, and Facility Agent

**Transaction **
- ISAGEN Colombia’s third largest power producer needed long-term financing for expansion and refinancing. Citigroup arranged a two-tranche Facility, encompassing a 20 year “A” Tranche and a 5 year “B” Tranche.
- ISAGEN will use the loan to modernize and maintain the San Carlos, Jaguas and Termocentro facilities. In addition, proceeds will be used to restore capacity to the Calderas hydroelectric plant that was damaged by an illegal group and is currently inoperative. The transaction will also facilitate the development of the Amoya project, thus incrementally increasing the stability of Colombia's generating capacity while substantially reducing the risk of blackouts
- Tranche A benefits from a comprehensive guarantee from the Colombian Government and is subsequently insured by OPIC permitting 20 year financing at attractive pricing
- ISAGEN, as a power company, wanted Colombian Peso financing, which is synthetically provided as an option in the structure. The company, subject to market conditions, can elect a funding option that indexes principal and interest to the peso – dollar exchange rate. In addition, OPIC is providing appreciation cover against an appreciating peso.
- This was the first international financing for ISAGEN.
- Colombia’s Central Bank regulation was changed to allow the use for the first time of a non-bank SPV as lender of record.
- The transaction will also allow the Government of Colombia to list and sell a portion of ISAGEN to Colombian Investors (“Democratizacion Accionaria”).

**Notes:**
Example of synthetic local currency

## Trade Bank of Iraq 

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**Trade Bank of Iraq (TBI)**
**US$70MM OPIC Guaranteed Financing**
*Borrower:** **	*Imports L/C Trust Limited
*Deal Size:*	US$70 MM
*Purpose:** **	*To establish a Trust that will issue financial guaranties to certain commercial banks that confirm letters of credit issued by TBI
*Guarantor:*	Overseas Private Investment Corporation (“OPIC”)
*Closing Date:****	***July 20, 2006
*Citigroup Roles:   *Sole Arranger, Lender of Record, Trust Administrator,** **Facility Agent, Confirming Bank

**Transaction Highlights**
- TBI was created by the Coalition Provisional Authority (the “CPA”)in 2003, to facilitate the payment for goods and services imported into Iraq.  Today, TBI is Iraq’s most creditworthy financial institution that satisfies the urgent need for trade facilitation in the reconstruction process.
- The structure of this facility provides TBI its first ever commercial credit, since the Trust is providing financial guarantees to certain confirming banks in the case of a non-payment event by TBI.
- The Trust will guaranty reimbursement obligations on TBI letters of credit that meet certain eligibility criteria, such as those letters of credit not supported by export credit agency coverage.
- Under this facility, the Trust receives a loan from Citibank; 75% of this loan is guaranteed by OPIC on a first loss basis, while the remaining 25% is provided by Citigroup and ING.
- The transaction represents one of several Citigroup-OPIC collaborations that support Iraq’s economic development.
**Innovations**
- This unique facility represents the first time commercial lenders such as Citigroup, ING and others are able to extend letters of credit in Iraq that are not fully cash collateralized.
- For the first time, Citigroup was able to structure a financial guarantee through the usage of SPV to provide credit to trade finance, a segment that has never before used OPIC support.  This has allowed TBI to access a new way of financing its trade credit.

**Notes:**
Example of tranched loss structure

## BRAC, Bangladesh

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**BRAC**
**US$ 180MM Agency Financing Solution**
*Issuer:** **	*BRAC
*Purpose:** **	*To support microfinance lending in Bangladesh
*Investors:** **	*FMO, Kfw, Citibank, Pubali Bank Limited and The City Bank Limited
*Transaction:**	*US$30 million over 6 years, for a total investment of US$180 million
*Currency:*	Bangladesh Taka
*Transaction *
*Structure:**	*12 one year tranches, with each issuance staggered by six months
*Repayment:**	*Monthly amortization
*Closing Date:****	***July 6, 2006
*Citigroup Roles:   *Co-Arranger, Investor, Guaranteed Investor, FX provider and Account Bank

**Transaction **
- This groundbreaking transaction, denominated in Bangladesh Taka (BDT), provides an aggregate of BDT 12.6 billion (US$ 180 million equivalent) of financing for BRAC (the largest NGO in the world, with 5 million borrowers) over a period of six years.
- Under the program, BDT 1 billion (US$ 15 million equivalent) will be disbursed every six months to BRAC, with a maturity of one year.
- FMO will directly purchase one-third of the certificates. Citibank, N.A will purchase another one-third of the certificates, backed by a guarantee from FMO and counter guarantee from Kfw. Additionally, Citibank, N.A. Bangladesh together with Pubali Bank Limited and The City Bank Limited will purchase the remaining one-third of the certificates.
- The certificates received a AAA rating by Credit Rating Agency of Bangladesh.
**Highlights**
- First securitization in the Bangladesh market.
- First true local currency guarantee (without any crystallization in US$) provided by FMO.
- First securitization of microfinance receivables in Asia.

**Notes:**
Example of subordination

## Agency Risk Sharing Facilities

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**Example Agency Risk Sharing Facility**
*Borrowers:** **	*Small and Medium Enterprises
*Facility:**	*Local Currency Equivalent of US$50 million
*Purpose:** **	*To expand Citigroup lending to SMEs and MMEs
*Investors:** **	*Citibank and agency. Third party investors allowed.
*Transaction:**	*Transaction parameters are pre-defined. In some cases, portfolio concentration amounts are specified.
*Currency:*	Local Currency
*Transaction *
*Structure:**	*Citibank acts as lender and the agency risk shares (provides a guarantee) for a percentage of the transaction.
*Pricing:**	*Based on market. Fee structures vary (% share, flat fees). Can be based on portfolio characteristics or singular risks.
*Risk Share *
*Coverage:*	Principal and Interest
*Tenor:****	***Maximum tenor is 5 years
*Citigroup Roles:*	Financier, Arranger and Facility Agent

**Transaction **
- Citigroup’s global risk policies and KYC/AML process allow for agency “best practices” to be disseminated globally.
- Under the risk-sharing facilities, agencies can guarantee between 50 – 85% of the amount of the loans made by Citigroup to eligible SME borrowers under the facilities.
- The agency’s guarantee is payable in local currency.
**Highlights**
- True local currency guarantee (without any crystallization in US$) provided by agency.
- Facilitates greater lending by Citigroup to small and medium sized enterprises (including enterprises with less than US$5 million annual turnover).
- Mobilizing both official agency and private sector funding, these are replicable transactions with an emerging small and medium sized enterprise sector in need of financing support.
- The facilities permit timely execution of small transactions.

**Notes:**
Example of subordination

## 4.  Conclusions

## Conclusions

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**Presence Power**
- Private sector banks, such as Citigroup, have the on-the ground presence and client relationships which can be leveraged by official agencies through coordinated efforts.
**Windows on the World**
- Capital markets are growing; liquidity is immense. Citigroup’s infrastructure can allow an extension of markets with support from agencies.
**It’s not easy being green**
- As an Equator bank, Citigroup has moved toward MLAs and commonality in ESRM best practices.
**“****Super-size Me”**
- Official agencies offer enhanced terms making possible transactions that are not available in the private sector alone by increasing transaction size and tenor.
**2 + 2 = 5**
- Clients benefit from the expertise and knowledge of the official agencies and the private sector working in partnership, strong communication is critical.

## 5.  Contacts

## Contacts

|  |  |
| --- | --- |
| Eli HassineManaging Director & Global Head+1 212 816 1710eli.hassine@citigroup.com     | Mini Roy                                            Managing Director & Primary Origination Head+1 212 816 1226mini.roy@citigroup.com  |
| Michael OkaDirector, New York+1 212 816 1202michael.h.oka@citigroup.com    | Paolo De MichelisVice President, London+44 20 7986 4869paolo.demichelis@citigroup.com  |
| Winnie LuiAssociate, Hong Kong+852 2868 6551winnie.w.lui@citigroup.com   | Jessica EmeryAnalyst, New York+1 212 816 4809jessica.emery@citigroup.com |

- Our Contacts Are the Following:

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