IDB Invest Launch $1 Billion Securitisation Deal

The US-based Inter-American Development Bank (IDB) Invest, a member of the IDB Group, on Wednesday announced a $1 billion securitisation transaction, the first of its kind for private sector investors to buy multilateral development bank (MDB) assets from Latin America and the Caribbean.

This innovative financial structure seeks to create a new MDB asset class for international investors, IDB Invest, which partnered with Santander and Clifford Chance as key advisors, said. The new securitisation will be unveiled on October 24 during the launch event “On the Road to Originate to Share,” to be held at IDB Headquarters in Washington, D.C.

The transaction, called Scaling4Impact, consists of securitising $1 billion of IDB Invest’s portfolio, creating a tranche structure with an $870 million senior tranche; a $100 million mezzanine tranche, a portion of which was sold to international investor Newmarket Capital and the remainder insured by AXIS and AXA; and a $30 million junior tranche retained by IDB Invest.

The securitised portfolio includes assets from 20 countries and 10 sectors, such as corporates, infrastructure, energy and financial institutions. The transaction will free up capital, creating up to half a billion in additional lending capacity for new development projects.

Similar recent deals by IDB Invest suggest this could attract around $4 billion from institutional investors through instruments like the 144a RegS B-bond in international debt capital markets, the IDB Group said.

Attracting Private Capital

IDB President, Ilan Goldfajn said that with their new originate to share business model, their strong ties with governments and the deep synergies between the bank’s private and public sector work, they were uniquely positioned to attract private capital.

“Through this landmark transaction, we are connecting development assets with global investors to scale impact in Latin America and the Caribbean,” Goldfajn said.

As one of the foundational steps in IDB Invest’s new originate-to-share business model, the transaction introduces a series of firsts, including the first securitization focused on Latin America and the Caribbean MDB assets for private investors, as well as the first portfolio-level risk transfer by IDB Invest.

IDB Invest CEO James Scriven said that this initiative is a major step in IDB Invest’s transition to its new originate-to-share business model, aimed at mobilising capital and scaling impact through the private sector.

He added: “We are building a new MDB asset class to crowd-in investors seeking unique impactful investment opportunities in emerging markets.”

This ground-breaking transaction aligns with key G20 recommendations from the Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks (CAF), including financial innovation, balance sheet optimization through private sector risk transfers, enhanced engagement with rating agencies, and leveraging the Global Emerging Markets (GEMs) database to showcase MDB asset performance to private investors.

Scaling4Impact reinforces IDB Invest’s commitment to Latin America and the Caribbean and its role as a pioneer among MDBs in connecting development assets in the region with international investors.