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IFC looks to issue two global dollar bonds

WASHINGTON - The World Bank's private-sector lender will at least double the number of US-dollar global bonds this year as it increases its borrowing to a record $8 billion.

International Finance Corp's Deputy Treasurer and head of funding, John Borthwick, told Reuters the $8 billion would be an increase of 60 percent from $5 billion last fiscal year, and almost triple the $3 billion of the year earlier.

‘The change that is going to happen this year is that instead of doing just the one $1 billion issue, there will be more than one,’ said in an interview on Thursday.

‘There will certainly be one in the fall and one in the spring, which is unprecedented,’ said Borthwick. ‘At this point we don't know the size of the issues, so there is a possibility they could be larger than $1 billion, but it depends partly on what happens in other markets.’

The World Bank unit is the largest and only global multilateral source of debt and equity for private companies in developing countries. Its borrowing needs have grown sharply in recent years with the fast rise of emerging markets and increasing interest in frontier markets in Africa.

Those increased needs have been fueled further by the global financial turmoil that has caused banks to pull back from lending to medium-sized firms in developing countries, making IFC's funding more necessary.

The financial gloom and market disruptions have also increased demand for bonds issued by triple-A rated institutions like IFC, Borthwick said, noting the success since 2000 of IFC's annual $1 billion global bond.

‘The only segment of the market that is really functioning well are the global US dollar bonds that are being issued by triple-A top credits,’ said Borthwick, noting the European Investment Bank's $4 billion three-year global bond issue on Aug. 26 that was snapped up by central banks.

‘It's not unusual for our needs to go up in times of crisis. What is different now is it's not a crisis in emerging markets, it's a crisis in developed markets,’ he said.

Last year, IFC's main sources of funding was the global dollar bond market and domestic bond markets such as Japan's Uridashi, New Zealand's Kauri, Australia's Kangaroo and Canada's Maple.

Borthwick said search for yield and diversity, as well as falling US rates, forced investors like IFC, to look outside traditional safe-haven currencies to more exotic ones such as the Turkish lira and Brazilian reais.

‘We've done several million Brazilian reais in just the last three months, which is actually a lot for that market. It's a new currency and has been growing rapidly,’ he added.

But with interest rates looking as though they're falling in many emerging economies, global investors are taking a ‘wait and see’ attitude, and Borthwick said US dollar bonds were a safe bet in the current market.