Cofinancing

Complementary Financing Scheme (CFS)

Benefits Maturities Fees Eligible Cofinanciers Documentation Administration Case Studies Track Record

Benefits

ADB acts as the lender of record without recourse for CFS loans. These loans are presold to commercial lenders. It should be noted that the CFS is used solely to facilitate commercial cofinancing for ADB-assisted private sector projects.

Since ADB is the lender of record, the CFS loans receive the benefit of ADB's preferential status and certain privileges and immunities, including:

• exemption from any restrictions on currency conversion and on the remittance of interest and repatriation of principal,
• exemption from withholding tax,
• reduced likelihood of rescheduling in the event of an external debt crisis in the borrowing country,
• exemption from special debt provisioning requirements in some countries, and
• benefits from linking the complementary loan with ADB's direct loan through an optional cross-default clause

Other benefits include ADB's

• project appraisal
• supervision of project implementation
• loan administration services

In administering the CFS loan, ADB acts as a channel for disbursements and debt service payments.

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Maturities

The maturities of CFS loans on a project finance basis have typically ranged from 7 to 8 years for industrial and manufacturing projects, and from 10 to 12 years for BOO/BOT infrastructure projects.

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Fees

ADB charges market based fees for its own account, in addition to those fees charged by the commercial lenders (such as underwriting fees, management fees and annual agency fees).

CFS Fees Charged by ADB for its Own Account

FEE	AMOUNT
Arrangement	75-100 basis points on the amount of the CFS loan, with a minimum of $20,000
Administration	$5,000 per participating CFS lender per annum, with a maximum of $20,000 per annum

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Eligible Cofinanciers

Any reputable commercial financial institution operating on a commercial basis is eligible as a CFS lender, except those institutions whose head office is registered in the same country as the project.

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Documentation

CFS documentation comprises

• direct loan agreement between ADB and the borrower,
• complementary loan agreement between ADB and the borrower,
• participation agreement between ADB and the participating CFS lenders.

The relationship between a CFS lender and the borrower is indirect, although the borrower is informed of the lender's identity.

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Administration

As lender-of-record, ADB administers CFS loans on behalf of the participating CFS lenders with the same standard of care it exercises in respect of loans for its own account. In matters of critical importance to CFS lenders, ADB does not act unilaterally, but instead seeks the lenders' views and consent prior to taking action, as specified in the participation agreement.

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Case Studies

• Chengdu Generale des Eaux-Marubeni Waterworks Co. Ltd. (PRC)

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Track Record

During 1970-2006, ADB arranged 39 CFS loans for 35 projects in 10 DMCs, for a total of $1.34 billion.

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