IFC Strengthens Banco Davivienda Partnership in Colombia, Invests $60 Million
Bogotá, March 17, 2006—The International Finance Corporation, the private sector arm of the World Bank Group, announced today an agreement to invest $60 million in Banco Davivienda, one of the leading financial institutions in Colombia and a longstanding IFC client. This is IFC’s first local currency subordinated financing in Colombia.
The IFC investment will consist of an equity investment of $25 million through the subscription of new common shares of Davivienda, and a stand-by subordinated bond financing of $35 million equivalent that would count as Tier-2 capital for regulatory solvency requirements.
The $60 million financing package will strengthen Davivienda’s capital base and support the expansion and consolidation of its operations in Colombia. IFC previously provided a partial credit guarantee of up to UVR (unidad de valor real, a notional currency that reflects the inflation adjusted Colombian Peso) 300 million to facilitate a domestic subordinated bond issue of UVR 1 billion by Davivienda.
At the onset of Colombia’s financial and mortgage sector crisis in the late 1990s, Davivienda played a leading role in the transformation of the Colombian mortgage sector, as the former savings and mortgage lending institutions (also known as CAVs) shifted their focus from financing mortgages to origination and securitization, at the same time transforming themselves into full-service banks.
Atul Mehta, IFC’s Director for Latin America and the Caribbean, said, “Since Davivienda set up operations in 1973, IFC has supported its successful transformation from a savings and loan institution specializing in mortgage lending to one of the leading full-service commercial banks in Colombia. We are proud to become a shareholder of Davivienda.”
Efrain Forero, Davivienda’s chairman, said, “IFC’s investment is a vote of confidence in Davivienda and in the future of the Colombian financial markets. IFC fully understands and appreciates our vision for creating the leading integrated financial services group in Colombia and has demonstrated its support with a timely decision to become an equity partner.”
Jyrki Koskelo, IFC’s Global Financial Markets director, said, “A vibrant and healthy private sector is a key element of economic growth and sustainable job-creation. Strengthening the financial sector in Colombia is a key IFC priority. Our collaboration with Davivienda shows a clear commitment to pursue this objective and will establish a foundation for other financial markets development work in the region.”
Davivienda, including Bansuperior, is the fourth largest financial institution in Colombia, with approximately $3.7 billion of assets and nearly $400 million of equity as of December 2005. Davivienda serves more than 2 million customers through a nationwide network of 277 branches and 5,370 employees, operating in 48 towns and cities. Davivienda is majority owned (68.5percent) by Grupo Bolívar, the fifth largest economic conglomerate in Colombia.
IFC in Colombia
IFC’s total portfolio in Colombia was $280 million as of June 2005.Since Colombia joined IFC in 1956, the Corporation has provided $1.4 billion, including syndications, for 58 companies.
The financial sector continues to be one of IFC’s priorities in Colombia, with special emphasis on housing finance and microfinance, as well as strengthening local capital markets and improving corporate governance. IFC’s strategy in the country also involves increasing support to strategic sectors for economic growth in the context of free trade agreements. This strategy includes financing infrastructure projects such as port expansion, road and airport concessions, and support to companies in the logistic services sector. In addition, IFC seeks to finance oil and gas companies expanding in the region.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.
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