ADB catalyzes private investments through direct financing, credit enhancements, and risk mitigation instruments. ADB provides direct funding assistance through loans and equity investments. We offer political risk guarantee and partial credit guarantee instruments to enhance the risk profiles of transactions to attract both foreign and local commercial lenders to projects in the developing member countries (DMCs), and to encourage them.
Through cofinancing and guarantees, we also support local investors, domestic banks, and financial institutions to provide funds on suitable terms for ADB-assisted development projects. ADB also mobilizes additional resources for projects through a "B-loan" arrangement.
ADB offers hard currency loans, both senior and subordinated, as well as mezzanine financing. We also offer local currency loans in selective markets on a case to case basis. Interest rates and other terms vary, depending on a company’s or project’s needs and risks.
Rates - In pricing its loans, ADB considers prevailing market rates in the relevant country and sector, factoring in country and transaction risks. ADB provides floating rate loans at a spread above the London interbank offered rate (LIBOR) or Euro interbank rate, depending on the currency. It also offers fixedrate loans at the fixed-rate swap equivalent of floating-rate loans.
Fees - Market-based fees are charged. Typically, on floating-rate loans, ADB charges a once-only front-end fee as well as an ongoing commitment fee on the undisbursed balance. We may also charge a fee to cover upfront costs associated with due diligence. Project sponsors or clients will reimburse out-ofpocket expenses, such as travel and external advisory services (i.e., legal counsel, technical consultants, and environmental and insurance advisors, if any).
Security - We will seek security appropriate for the loan and type of financing.
ADB may invest directly in an enterprise. It offers financing through equity investments, including direct equity investments in the form of common shares, preferred stock, or convertibles. Equity investments in enterprises, especially financial institutions, occur before an initial public offering. ADB does not seek a controlling interest in an investee company, and will not assume any management responsibilities. It will, however, typically wish to reserve the right to appoint a nominee or an observer to the board of directors of each of its investee companies and to selected board committees, and will exercise voting rights as a shareholder. It will maintain regular contact with company management and require periodic reports on the progress of capital projects, operating performance, financial condition of the enterprise, and economic value added. ADB also requires reports on specific indicators for development outputs and outcomes, and monitors continued compliance its environmental and social safeguards.
Once the objective of its investment has been achieved, ADB will divest its shares at a fair market price. Facilitating this divestment may require the eventual listing of the shares of the investee enterprises on one or more stock exchanges, conducting a trade sale or entering into a suitable buyback agreement. In general, ADB prefers to sell shares to the nationals of the host country to broaden local ownership and further develop local capital markets. When disposing of its shares, ADB will endeavor to consult with its major investment partners and give due consideration to their views, without being precluded from disposing of its investments at its sole discretion.
ADB may also invest in a private equity fund, up to certain exposure limits. ADB will reserve the right to appoint a nominee to the advisory board of the fund. It will maintain frequent contact with the fund manager and require detailed quarterly reports on the fund manager’s investment, monitoring, value addition, and, eventually, divestment progress. With the same frequency, ADB will closely monitor financial performance as measured by net asset value. ADB makes long-term commitments of capital to private equity funds, in keeping with the long-term lifecycle of such investments, and ordinarily stays invested as a shareholder or limited partner through the life of the fund.
ADB provides guarantees that can be used to cover political risks, and more comprehensively, both political and credit risks.
ADB can mobilize additional debt resources for a financing through an arrangement in the form of a B-loan/Lender of Record structure.
In addition to financial products, ADB also offers technical assistance (TA), on a selective basis, for public and private sector operations. This may include the following: