AFRICAN DEVELOPMENT BANK GROUPSYNDICATIONS& CO-FINANCING PRESENTATIONSe p te mb e r 2 0 2 0CONTENT

PART I : SYNDICATIONSPART II : CO-FINANCING

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SYNDICATIONS
1.1 WHAT IS LOAN SYNDICATIONS
1.2 A/B LOANS
1.3 PARALLEL SYNDICATIONS
1.4 OVERVIEW OF TERMS

1.1 SYNDICATIONSDEFINITION• A loan that is provided by a group of financial
institutions / lenders (syndicate) and is structured,arranged, and administered by one or several
arranging financial institutions.

WHY SYNDICATE?

One lead bank coordinating the syndicate of banks
Borrower essentially deals with the lead bank

WHAT DOES THIS MEAN?

Participating banks can benefit from lead bank’s
market knowledge and best practices in lending

WHAT DOES THIS MEAN?

Borrower benefits from new banking relationships• The Bank will be mandated by the Borrower to be
the lead arranger for the debt financing.
• The Bank will be responsible for mobilizing financing
for its Borrower on a “best efforts basis”.

1.1 SYNDICATIONS – LEVERAGING THE BANK’S RESOURCES

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Better use of the Bank’s capital

Syndications allows the Bank to invest in projects while efficiently
managing its capital and its prudential ratios. The objective being to do
more with less by leveraging the Bank’s preferred creditor status andreputation (e.g. through A/B loans).

Funding Gap

Catalyze private and institutional investment

One of the main mandates of the Bank is to catalyze capital fordevelopment projects in Africa by creating an enabling environment anda demonstration effect.

Huge financing requirements

The gap in terms of funding the High 5 is 18x higher than the Bank’s
annual lending capacity. Collaboration with other institutions istherefore required and is in line the Bank’s mandate and the President’spriorities.

Increase visibility and impact

Playing a leadership role in arranging transactions will maintain theBank’s position as premiere development finance institution for Africa.
51.1 SYNDICATIONS – ELIGIBILITY CRITERIA Sectors in the syndication pipeline are generally infrastructure projects such as transportation, energy;
and agricultural projects
 Eligible counterparties are generally financial institutions, corporates, independently and commerciallyoperated state owned enterprises, as well as greenfield and brownfield projects
 Commercial viability is a key issue for the syndicated loan market.
 Financial projections must show profitable turnover to cover companies’ financial obligations
 All projects must meet the AfDB’s environmental and social requirements All projects will go through a due diligence processes covering environmental, legal, technological, social
aspects.
 The Bank’s loans can be up to 33% of total project costs.

1.2 SYNDICATIONS: A/B LOANS
A/B Loans

Illutration of A/B loan structure• Acting as Lender-of-Record, the Bank lends to a borrower;

Borrower via A/B Loan

• Keeps/ commits to the A- loan portion for its own book (the ALoan); and offers participations to commercial investors (the BLoan)

AfDB - Lender of Record (One Agreement)• B lenders benefit from the Preferred Creditor Status• One loan agreement, AfDB is lender of record for entire A/B loan
• B Loan Participation Agreement transfers all risks to B lender

AfDB A-Loan

ADB B loan

A/B Loans

B Loan Participation Agreement• To leverage up the Bank’s capital investment to a single
project

Participant
1• To facilitate the entry of commercial co-financiers• B-lenders benefit from the Bank’s PCS and immunities andprivileges through the B Loan Participation Agreement• To provide the necessary risk mitigation to achieve abankable transaction structure for the B Loan lenders

Participant2

Participant
3

Disbursements
Debt Service

B- Loan Syndicate
A-Loan is the amount of the Loan that AfDB has agreed to keep for its own
credit
B-Loan is the portion of the Loan that is syndicated to commercial financial
institutions

1.2 SYNDICATIONS – PREFERRED CREDITOR STATUS
The Bank enjoys Preferred Creditor Status (PCS) Bank’s loans have preferential access to foreign exchange in the event of foreignin RMCs – strong mitigant to “Transfer and Convertibility Risk”

exchange crisis

 For example, in case of a default or a near default of a country on its financial obligations, it
may restrict the private sector access to foreign currencies but this restriction will not apply incase the money is meant for the repayment to the Bank.
 For public sector exposures, repayment to the Bank generally takes precedence over othercreditors in the event of sovereign default

A/ B-loan structure extends PCS to participating banks
under the B loans extended by the Bank

1.3 SYNDICATION – PARALLEL FINANCING
Borrower

ECAs

DFIs

Commercial Banks

Parallel Lenders

Parallel Financing Various FIs lend under parallel facility agreements all coming underharmonized contractual arrangements, the Common Terms
Agreement (“CTA”)

Rationale To partner with financial institutions including DFIs and ECAs toseparately deliver financing to the project Individual loan agreements required to explicitly refer to individual
policies and privileges embedded in each DFIs charter1.4 SYNDICATIONS – OVERVIEW OF TERMS

Fees

Lending
Rate

Lending
terms

Characteristics
Eligibility

Public Sector Companies in all RMCs without a sovereign guarantee; and Private Sector Companies inall RMCs

Maturity

Depends on the underlying project and participant’s risk appetite

Grace period

TBD

Currencies

EUR, USD, JPY, ZAR

Pricing formula

Base rate : Floating (6m Libor/Euribor, 3m Jibar) or Fixed (Amortizing swap rate)

Base rate

A and B loan will carry the same type of interest

MarginBased on the project risk

Front-end fee

100 bps of loan amount at signature

Commitment Fee

50bps – 100bps of undisbursed amountAppraisal fee

Determined during appraisal

Supervision fee

As needed

Other fees

Arrangement and syndication fee, loan administration fee, underwriting fee…

1.3 SYNDICATION – SELECTED TRANSACTIONSLake Turkana

Transnet

Eskom

Redstone

Ghana Cocoa Board

2014
EUR 475.5m

2016
eq. USD 657 million

2017
USD 495m

2019
ZAR 7.6 billion

2020
USD 600m

Mandated Lead
Arranger and Lender

Mandated Lead
Arranger and Lender

Mandated Lead
Arranger and Lender

Mandated Lead
Arranger andCoordinating Bank

Senior Lender andArranger

Project finance2014
PFI Deal of the Year

A/B Loan

Senior corporate loan

Participating lenders:Bank of China, Bank ofTokyo Mitsubishi,
SMBC, Mizuho, HSBC
LondonParticipating lenders:
Citibank, Bank ofChina, Bank of Tokyo
Mitsubishi, + 6 lenders

Participating lenders:
Proparco, TDB, DEG + 4
other lenders
AfDB funding:
USD 95.5m + USD
20m(PRG)

AfDB funding:
ZAR 2.27 billion(eq. USD 247 million)

AfDB funding:
USD 10m

Participating lenders:
DBSA, CDC, FMO DEG +4 other lenders
AfDB funding:
ZAR 2.27 billion

Long-term facility
Dual Tranche Term
Loan
Participating lenders:
DBSA, CDP, JICA, Credit
Suisse + 8 other privatelenders
AfDB funding:
USD 50m

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CO-FINANCING
3.1 IN-HOUSE CO-FINANCING FACILITIES3.1 IN-HOUSE CO-FINANCING – FLAGSHIP FACILITIESFunding Resource

Description

Use of Available Resources

Available Resources/Target

Co-financing for selected African
Countries on comparable or better
terms.

USD 2.8 billion available underEPSA IV

Co-financing for selected nonsovereign operations in Africancountries on concessional terms.

USD 2.8 billion available underEPSA IV

Accelerated CoFinancing Facility forAfrica (ACFA)

Co-financing agreement withJapan International Cooperation
Agency (JICA) under the
Enhanced Private Sector
Assistance Initiative.

Private Sector
Investment Facility

Co-financing agreement withJapan International Cooperation
Agency (JICA) under the
Enhanced Private Sector
Assistance Initiative

Africa Growing
Together Fund (AGTF)

Special Fund with Foreignexchange reserves from thePeople’s Bank of China.

Joint co-financing for the Bank
Sovereign and Non-Sovereign
projects (80/20 split).

USD 1.24 billion, including USD
400 million for non-sovereign
operations until 2024

Investment Platform with theEuropean Union

Blending finance: combination ofEU grants with loans or equityfrom public and private financiers,
including the Bank. The EC has
recently approved guarantees.

Over EUR 980 million approved(Regional offices pivotal toobtaining these approvals)

EU- External
Investment Plan3.1 IN-HOUSE CO-FINANCING – FLAGSHIP FACILITIESFunding Resource

Description

Use of Available Resources

Available Resources to date

Islamic Development
Bank (IsDB)

Co-financing Agreement with
the Islamic Development BankGroupCo-financing of sovereign andnon-sovereign projects incommon member countries withTarget of USD 1 billion for
co-financing for each
institution

Nigeria Trust Fund(NTF)

Self-sustaining revolving fundto co-finance public andprivate sector projects fromADF countries

Concessional and nonconcessional financing terms

USD 50 million

Korea EconomicDevelopment
Cooperation Fund

Co-financing Agreement with
the Government of Korea(Exim Bank)

Parallel co-financing in African
CountriesUSD 455 million

Fund for African
Private Sector
Assistance (FAPA)

Multi-donor Trust Fund of theBank, Japan and Austria.

Untied grants for technicalassistance and capacity building

USD 25m

THANK YOU

Contact:
Syndications| Co-financing
FIST1@AFDB.ORG