Cofinancing

Frequently Asked Questions

About Commercial Cofinancing

• What are the prerequisites for project sponsors and their bankers to obtain Asian Development Bank's (ADB) cofinancing for their projects? How and when should they discuss the matter with ADB?
• How does ADB inform potential cofinanciers of projects that require cofinancing?
• How should potential commercial cofinanciers express their interest in cofinancing a particular project?
• How are commercial cofinanciers selected?
• Will ADB consider a stand-alone guarantee or CFS loan?
• Is there any limit on the amount of ADB guarantee support?
• Do ADB's procurement guidelines apply to CFS loans or loans with ADB guarantees?
• Can private sector PRI cover a CFS loan?

What are the prerequisites for project sponsors and their bankers to obtain Asian Development Bank's (ADB) cofinancing for their projects? How and when should they discuss the matter with ADB?

Cofinancing is possible only if ADB directly assists the project with a loan, an equity investment, or both. Private sector sponsors and their bankers should discuss the scope for ADB participation with ADB's Private Sector Operations Department (PSOD) at the earliest possible stage of project development. Once PSOD decides to process an ADB loan and/or equity investment for a project, the Office of Cofinancing Operations will assist in making the necessary cofinancing arrangements. The sooner a project sponsor ascertains ADB interest, the better.

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How does ADB inform potential cofinanciers of projects that require cofinancing?

The ADB web site provides project profiles of current commercial cofinancing and export credit opportunities. These profiles can be accessed by clicking on the "Opportunities" tab in the web site and scrolling down to the section entitled "Cofinancing." The profiles are also available in hard copy in ADB Business Opportunities (a monthly publication sold through ADB's Office of External Relations), under the section entitled Project Profiles for Commercial and Export Credit Cofinancing. ADB's Office of Cofinancing Operations may also be consulted concerning projects with cofinancing potential.

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How should potential commercial cofinanciers express their interest in cofinancing a particular project?

They should review ADB's web site and/or ADB Business Opportunities regularly, and communicate their interest in cofinancing particular projects to ADB's Office of Cofinancing Operations through fax, telephone, or e-mail.

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How are commercial cofinanciers selected?

The selection or mandating process varies, depending on the nature of the project, the preferences of the borrower, and market conditions. For small or medium-sized cofinancing transactions, ADB may act as the lead arranger and invite potential cofinanciers to participate in the syndication.

For complex or large transactions with ADB credit enhancement support, ADB normally assists the borrower in selecting one or more financial institutions through a competitive bidding process to underwrite and/or arrange the proposed cofinancing. ADB may also work closely with the arrangers and assist in the general syndication as required.

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Will ADB consider a stand-alone guarantee or CFS loan?

No. A guarantee or Complementary Financing Scheme (CFS) loan will be considered only for a project in which ADB has some direct participation. In the case of a guarantee, ADB's direct participation could take various forms (e.g., a direct loan or an equity investment). In the case of CFS, an ADB direct loan is always required.

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Is there any limit on the amount of ADB guarantee support?

There is no limit on ADB guarantees for public or private sector projects that are backstopped by a host government counter-guarantee.

For public sector projects, a host government counter-guarantee is a prerequisite for any ADB guarantee support.

For private sector projects for which there is no host government counterguarantee, the limits on ADB assistance (comprising direct participation and guarantee support) are as follows.

Political Risk Guarantee (PRG): $$150 million or 50% of project costs, whichever is less (with all ADB exposure calculated on a face value basis). The proportion between ADB's direct participation (e.g., in the form of a loan and/or an equity investment) and PRG support is determined on a project-by-project basis, to appropriately leverage the PRG support.

Partial Credit Guarantee (PCG): $75 million or 25% of project costs, whichever is less, corresponding to ADB's Private Sector Operations prudential limit. (ADB's total exposure is calculated based on the face value of any direct debt or equity participation plus the present value of any PCG exposure.)

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Do ADB's procurement guidelines apply to CFS loans or loans with ADB guarantees?

No. However, ADB requires that

• procurement financed from the proceeds of a commercial cofinancing benefiting from ADB credit enhancement (either in the form of CFS or guarantee support) be restricted to ADB member,

• the proceeds of such cofinancing be used exclusively for the project, and

• the procurement be carried out with due attention to economy and efficiency.

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Can private sector PRI cover a CFS loan?

ADB welcomes close collaboration with private sector political risk insurance (PRI) providers, recognizing that they are an important source of risk-taking capacity and bring significant experience and skills in structuring projects and mitigating associated political risks. A CFS loan can assist participating lenders in mitigating political risk relating to currency inconvertibility and currency nontransfer. However, other facets of political risks such as (i) confiscation expropriation and nationalization, (ii) political violence, and (iii) breach of contract are beyond the scope of CFS. Accordingly, ADB generally has no objection to commercial lenders in a CFS loan purchasing PRI cover only for those three specified risks that are explicitly outside the benefits pertaining to CFS, as mentioned above.

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