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IFC guarantees enter new territory

Issuer: Ballarpur Industries Amount: Rs1.5 billion Launched: February 2001 Lead manager: DSP Merrill Lynch


The International Finance Corporation, the World Bank affiliate charged with investing in private enterprise, broke new ground last month when it provided a partial guarantee for 10-year rupee-denominated bonds issued by Ballarpur Industries (BILT) of New Delhi, India. The Rs1.5 billion ($32 million) private placement was a milestone of sorts in efforts by the Washington-based lender to ramp up a guarantee programme that it had seldom used before. The IFC had never used a guarantee to enhance the credit quality of local-currency-denominated bonds.

The BILT bonds carry a coupon of 11.7%, yielding 120 basis points over 10-year government securities. The deal found acceptance with investors that had expected it to pay about 100bp more, after the IFC spent time presenting a theoretical evaluation. The issue was oversubscribed by one-third. DSP Merrill Lynch served as sole adviser and lead arranger for the issue. The cost of the IFC guarantee was not disclosed.

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