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Capital Markets

Securitization: A steadier stream of health initiatives

A new borrower is using securitization technology to help save lives.

The International Finance Facility for Immunization (IFFIm) is a rare example of the capital markets being used in a direct attempt to ameliorate health conditions. Its proponents suggest the IFFIm will dramatically boost money provided to meet the much-vaunted Millennium Development Goals.

Officially unveiled in mid September, the initiative finances a programme of large-scale immunization against disease in developing countries. It uses a securitization vehicle, IFFIm, which is backed by part of its expected future income stream – mainly a series of future conditional annual donations by various governments.

This scheme will front-load aid to the Global Alliance for Vaccines and Immunization (Gavi) by leveraging long-term donor commitments. Principal and interest payments on the bonds will be repaid by future donor payment streams.

It will go to the capital markets within the next three to five months for its first deal and borrow as much as $4 billion over the next two to three years. "The timing will be subject to finalizing the few outstanding technical issuers and the negotiations with potential donors," says a UK Treasury spokesperson.

It is clear that the most likely method of selling the bonds will be a syndication.

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