International Investor Perspective on Local Currency Solutions Seminar

Colombo July 2016:

Jointly organized by Netherlands-based The Currency Exchange Fund (TCX), GuarantCo, FMO – the Dutch Development Bank, and Frontclear together with locally based  investment bank First Capital Holdings PLC, a specialized and distinct seminar entitled “International Investor Perspective on Local Currency Solutions” was recently held at the Cinnamon Grand Hotel, Oak Room Colombo. The focus of the seminar was to raising awareness among local Banks, NBFIs and Micro Finance Institutions about Foreign Currency Funding options and facilitating local participants to access funding from Development Financial Institutes (DFIs) and Foreign Investors.

Overview of the joint organizers –

TCX provides offshore lenders long-term instruments such as forward or cross currency swaps up to 15-yrs to hedge their foreign exchange (Fx) exposure when they originate debt in LKR. The Fund offers hedging solutions to local borrowers as well when local currency financing could not be made available.

End of 2013, TCX completed a four-year transaction with Softlogic Finance PLC to cover the interest rate and foreign exchange exposure of a credit line the company contracted in USD. The hedge helped Softlogic to match Rupees assets coming from leasing and hire purchase contracts with a USD credit line.

TCX has offered hedging instruments to support 16 loans in local currency for a total of USD 66 million.

GuarantCo seeks to enable long-term debt financing of infrastructure-related projects in either local or hard currency in Sri Lanka. Often projects may struggle to obtain debt finance in sufficient quantum or of a sufficient tenor, whether due to certain specific risks or market constraints. This can be overcome through the use of an appropriately structured guarantee.  Such guarantees can be used to enable direct lending from banks/ Financial Institutions or capital market issuances.

GuarantCo is part of the Private Infrastructure Development Group and sponsored by five G12 governments.

In August 2014, Softlogic Finance PLC issued a ‘AAA’ rated listed debenture (LKR 1.4 Billion) with the guarantee obtained by GuarantCo.

FMO is the Dutch development bank. FMO has invested in the private sector in developing countries and emerging markets for more than 46 years. FMO invest in sectors that have the highest long-term impact which include financial institutions, energy, agribusiness, infrastructure, manufacturing and services sectors.

FMO’s investment portfolio exceeds EUR 9.2Bn spanning over 85 countries making it one of the larger bilateral private sector development banks globally.

FMO’s Exposure in Sri Lanka is about USD 170 million, mainly to the financial sector.

Frontclear is a development finance company facilitating access by local financial institutions to interbank markets through providing credit guarantees to cover a transacting institution’s counterparty credit risk. Frontclear’s Basel III compliant guarantees and are in turn counter-guaranteed by KfW, a AAA-development financial institution. Frontclear is funded by European governments and development finance institutions including DFID, EBRD, Proparco, KfW and TCX.

In a recent transaction in 2016, Frontclear guaranteed a USD 25Mn cross-currency repo transaction between Commercial Bank of Africa (CBA) and Standard Bank of Southern Africa (SBSA). In this transaction, CBA receives USD 25 million in 1-year funding from SBSA and provides Government of Kenya Bonds as collateral. The deal is a first of its kind transaction as it provides for the cross border transfer of legal ownership of the local collateral instruments, and paves the way to a more robust, stable and inclusive interbank market in Kenya.

First Capital is a full-service investment bank providing a diverse range of advisory services and financial products. The integrated business platform of the company comprises four specialised areas – Capital Markets Advisory, Wealth Management, Fixed Income and Equities currently serving 2,500 companies, institutions, government agencies, high net worth individuals and retail clients seeking truly objective advice, innovative solutions and execution expertise.

First Capital’s industry leading transactions include the first ever foreign third party guaranteed AAA rated listed debenture offer and microcredit-backed securitization in Sri Lanka.

As a company listed on the Colombo Stock Exchange (CSE) since 1994 (Ticker: CFVF), First Capital exemplify requisite financial transparency and governance standards. Reflecting credit fundamentals including a robust capital structure, liquidity, risk controls and an earnings profile, we are rated A- by ICRA Lanka.