Healthy capital markets help to strengthen financial systems and increase the availability of funding. They diversify funding sources and enable companies to increase their investor base.
On a macroeconomic level, capital markets can contribute to greater stability in the financial sector, reduce currency risks and help fill in gaps in areas of the economy where traditional financing falls short.
For a company, access to debt capital markets can be a game changer. The ability to issue debt securities such as corporate bonds or asset-backed securities can enable a company to tap into larger amounts of financing than may be available from commercial banks, with better pricing conditions and longer tenors besides.
Most Latin American countries have bond markets, but the volume of private sector bonds issued in the region tends to be relatively low; the regional average as a percentage of GDP is one third that of the United States. The opportunity clearly exists to expand bond markets and offer companies more access to debt financing.
That’s what we’re doing at IDB Invest. We work with clients in many different sectors—from education, health and housing to agribusiness, forestry and renewable energy—to help them efficiently obtain debt financing, using our financial products and debt structuring expertise to extend loan maturities and mitigate risks. Our strong credit rating, sound due diligence and attention to integrity and social and environmental factors provide a “seal of quality” that enhances investor confidence.
Why is it important to have strong capital markets? Expanded access to financing drives a company’s growth, and that growth can bring enormous benefits to a country’s development. For example, securitizing education loans—that is, bundling individual loans into securities that can be bought and sold—can put higher education within the reach of more students; similarly, securitizing mortgages can open up the market for affordable housing. Green bonds, meanwhile, can spur investment in energy-efficiency and renewable-energy projects that otherwise might take a long time to get off the ground.
At IDB Invest, we offer our clients a range of products denominated in U.S. dollars or local currency, including:
- Partial Credit Guarantees:We can offer partial guarantees for different types of debt instruments, including simple corporate bonds, securitizations or project bonds. Such credit enhancements reduce risks for institutional investors and enable clients to diversify their funding sources and extend maturities.
- Bridge Loans: Often, a large infrastructure project—say a new power plant—obtains financing by guaranteeing payment based on future income. By providing short-term financing during the construction phase, we can reduce the risk to investors. Once construction has been completed and there is a reliable income stream, the project can be refinanced through the capital markets.
- Warehouse Loans: These loans allow special purpose vehicles or financial institutions to purchase and accumulate loans or receivables for securitization, using the underlying assets as collateral. The warehouse loan is repaid once the underlying assets are securitized.
- Anchor Investments and Securitizations: Under this arrangement, IDB Invest participates as the anchor investor of a debt issuance, providing confidence to the market and attracting other investors to purchase or subscribe to a debt security.
- Liquidity Lines: These credit enhancements are contingent credit lines that can be drawn in case of insufficient cash flow generation.
- Multi-Sponsor Securitization Vehicle: These loans allow special purpose vehicles or financial institutions to purchase and accumulate loans or receivables for securitization, using the underlying assets as collateral. The warehouse loan is repaid once the underlying assets are securitized. The underlying assets are originated by multiple sponsors participating in the vehicle.
Thematic bonds support access to long-term financing in capital markets and diversify sources of funding.
Proceeds from Green bonds are exclusively allocated to financing projects with an evident environmental benefit: Renewable energy, biodiversity conservation, clean transportation, and ecological construction.
Proceeds from Sustainable Bonds are exclusively applied to finance a combinarion of both Green and Social projects
We facilitate innovative trade finance solutions through short- and medium-term loans and guarantees to cover the needs of the value chain of anchor clients.