Hong Kong/Bangladesh – LAWFUEL – Press Release Service – Global law firm Clifford Chance has advised Netherlands Development Finance Company (FMO), Citigroup and Germany’s KfW Entwicklungsbank (KfW) on the BDT12.6 billion (US$180 million) micro-credit securitisation launched by BRAC, the Bangladesh-based non-governmental organisation. The deal signed on 6 July 2006 and is the first securitisation of its kind in the world. It will be a major step forward in ensuring that low-income individuals, primarily in rural communities not reached by Bangladesh’s commercial banks, have sustainable access to financial services.
RSA Capital was the lead arranger, and FMO, Citigroup and KfW were co-lead arrangers. The triple A-rated deal, denominated in Bangladesh taka, is a securitisation of receivables arising from micro-credits extended to low-income individuals by BRAC. It will provide financing for BRAC over a period of six years and, under the programme, BDT1 billion (US$15 million) will be disbursed every six months to BRAC, with a maturity of one year.
The structure involves the creation of a special purpose trust that purchases the receivables from BRAC and issues certificates to investors representing beneficial interests in such receivables. The securitisation will allow BRAC to diversify its funding sources, reduce its on-balance assets and also disburse more funds to a larger number of micro entrepreneurs.
Stephen Roith, the Hong Kong-based capital markets partner who led the Clifford Chance team advising on the deal, comments:
“This innovative structure goes a long way to filling the massive gap that currently exists between microfinance supply and demand. The transaction is a landmark in the microfinance industry, and will boost the development of Bangladesh’s capital markets.
“Clifford Chance has been working very closely with Bangladeshi counsel over the last 15 months, drawing upon our international experience of complex securitisations in order to develop a tailored structured product that would work in Bangladesh. We are honoured to have been able to assist with this groundbreaking project.”
Clifford Chance’s capital markets team for the transaction also comprised senior associate Anthony Oakes and trainee Vernon Loh (both Hong Kong). Lee Khan and Partners acted as Bangladeshi counsel.
