Deutsche Bank, a global investment bank based in Germany, has launched “db Microfinance-Invest Nr. 1,” the world’s first externally rated securitization of subordinated microcredits. These subordinated loans will benefit 21 microfinance institutions (MFIs) in developing and emerging market countries.
There are three tranches making up the transaction structure. The senior tranche is worth EUR 36 million (USD 50 million) has been subscribed to by the bank’s private clients who have become increasingly interested in microfinance, such as high-net-worth individuals, foundations and church-affiliated institutions. It has been given a BBB rating by Fitch Ratings, the international credit rating agency. This is an essential component for private client subscription, as many clients’ investment guidelines would prohibit subscribing to an asset without a rating.
The mezzanine tranche is worth of EUR 20 million (USD 28 million) and has been subscribed to by KfW Entwicklungsbank, a specialist bank for international development that is part of KfW Bankengruppe, which in turn is 80% owned by the German federal government.
The junior tranche is worth EUR 4 million (USD 6 million) and has been taken up Deutsche Bank itself. The bank does not make public details about the rates of return.
Investors have subscribed to tranches for periods of 7 to 7.5 years. As this is the first product of its type, Deutsche Bank and its partners waived a certain proportion of their fees in order to help the asset class become established. For example, the international law firm Freshfields Bruckhaus Deringer, provided the bank with pro bono legal counsel. Deutsche Bank plans to launch a follow-up vehicle in the first half of 2008.
It is normal for the securitisation process with other asset classes to be rated by at least one major rating agency, but this has not occurred previously with subordinated microfinance credits. Getting a rating helps with the marketing of the securities issued and provides leverage to attract larger sources of funding and a risk cushion for other investors.
Amy Rennison, MicroCapital writer
Additional Sources”
Deutsche Bank:
http://www.db.com/presse/en/content/press_releases_2007_3645.htm
The Microfinance Gateway
http://www.microfinancegateway.org/content/article/detail/43474
Symbiotics:
http://www.symbiotics.ch/en/latest_news.asp?id=b650
Similar Posts:
- MICROCAPITAL BRIEF: Mogo Kenya Borrowing $7m from Verdant Capital Hybrid Fund to Boost Vehicle Ownership
- MICROCAPITAL BRIEF: Sun King Raises $130m for Pay-as-you-go Solar in Kenya, Citi is Sole Arranger
- SPECIAL REPORT: Partner with Agents for Impact, and We’ll Drive Impact Together!
- MICROCAPITAL BRIEF: BlueOrchard Sustainable Assets Fund (BOSAF) Raises $15m for Infrastructure Lending
- MICROCAPITAL BRIEF: Luxembourg Invests $25m in First Close of Green Earth Impact Fund, Managed by BlueOrchard, Schroders
