The World Bank Group, through its private sector arm, the International Finance Corporation, has closed its inaugural securitisation transaction; successfully launching a new model to attract institutional private capital into emerging markets. This transaction marks the first tangible step in a larger effort to build an originate-to-distribute model for emerging market investments.
The Group in a statement Friday said the $510 million collateralised loan obligation (CLO) comes after two years of determined work to design and prepare the product.
The Group added that the repackaging of IFC loans into rated securities creates a new asset class for emerging markets that meet institutional investment standards. This approach opens the door to the world’s largest pools of capital – pension funds, insurance companies, and asset managers to invest more substantially in emerging markets. Additionally, it will allow the World Bank Group to mobilize private investment at scale while recycling its own capital to support more developing countries and projects.
“Mobilizing private investment at scale is essential to creating the jobs that give people a ladder out of poverty and begin the journey of changing a family’s trajectory for generations,” said Ajay Banga, World Bank Group President. “This is step one in an originate-to-distribute strategy that holds significant potential to attract private capital at scale. It also frees up our balance sheet so we can support more countries and more private-sector players. The opportunity and the need are much larger—and so is our ambition.”
This transaction garnered strong investor interest and was listed on the London Stock Exchange. It includes a $320 million senior tranche sold to private investors, a $130 million mezzanine tranche insured by a consortium of credit insurers, and a $60 million equity tranche.
Goldman Sachs acted as arranger for the transaction.
The World Bank Group said it will launch regular issuances, establishing a scalable and replicable model for future growth.
The originate to distribute effort was an area of focus identified by the Private Sector Investment Lab, an advisory group launched in June 2023 with the aim of identifying barriers to private sector investment in emerging markets, and providing real world solutions to these challenges.
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