Funder

BlueOrchard successfully closed its latest Collateralized Loan Obligation (CLO), "BlueOrchard Loans for Development 2006-1", or BOLD, on 20 April 2006. The total amount raised was USD 99.1 million, and loans disbursed to 21 MFIs, in 13 different countries, and 5 different currencies.

Although the financial structure of a CLO is not particularly complex, the completion of a CLO is a daunting task. All parts and all parties must be in place such that on one single day, the closing date, a special purpose vehicle can issue bonds to pre-identified investors at pre-negotiated conditions and subsequently fund a portfolio of loans to a diversified group of microfinance institutions (MFI) at pre-negotiated conditions.

With this CLO, we were able to achieve several milestones in the microfinance industry:

- Historical deal size: BOLD represents the largest single commercial investment transaction in the history of microfinance ($99.1 million) offering fixed-rate 5-year funding to 21 microfinance institutions in 13 countries.

- Local currency component: Approximately 20% of the BOLD portfolio was in local currency (all other loans were in USD and EURO) with local rates fixed for a period of five years. The currencies involved were: Mexican peso, Colombian peso and Russian rouble. Foreign exchange risks have been completely hedged for investors through the use of currency swaps.

- Global investment banking partner: This deal marked the first involvement by Morgan Stanley in bringing its know-how in structuring an investment product to the microfinance industry.

- Development bank partner: By underwriting the entire subordinated note class, the Dutch development bank FMO accepted to take the "first loss" position of the structure thereby playing a catalyzing role in attracting private investors to the deal. We hope that FMO's participation will demonstrate to other international and national development banks their potential role in future capital markets deals.

- New mainstream investors: The BOLD senior notes were sold to mainstream institutional investors, including large European commercial banks, many of which did not have previous experience with microfinance investments. Participation by these more conventional investors represents a notable broadening of the traditional microfinance investor base of individuals, foundations and socially-responsible investors. Notes were denominated in USD, EUR and British Sterling, and offered in fixed and floating rate tranches. The Class A Notes are also listed in the Dublin stock exchange.













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