A select group of nine micro-lenders spread throughout seven countries tapped investors last month for a US$38 million transaction touted as the first CLO benefiting this business sector. Swiss consultancy BlueOrchard Finance and U.S. firm Developing World Markets arranged the deal. "They have the relationship with the microfinance institutions to pick out the cream of the crop," said Howard Finkelstein, an attorney at Buchanan Ingersoll, which advised the leads.
The structure is tiered in a typical senior/sub/equity fashion, with proceeds slated for new lending activity. Legal final maturity was seven years and average life was six. That matched the tenor of the collateralized credits, providing scarce long-term funding for the micro-lenders.
U.S. development agency Overseas Private Investment Corporation (OPIC) snapped up the US$29.3 million senior piece, which yielded 55 basis points over six-year Treasurys. Two subordinated chunks and an equity piece amounted to US$10.8 million, bringing the total issuance to slightly over the volume of underlying loans. With spreads ranging between 100 and 400 basis points over six-year Treasurys, the subordinated slices went to retail investors, corporations and foundations. "It was a very eclectic mix of investors," Finkelstein said.
The participating micro-lenders included Banco Mundial de Mujeres based in Cali, Colombia; Russia's KMB; and Cambodia's Acleda. Other beneficiaries hailed from Peru, Bolivia, Ecuador and Nicaragua. The underlying loans in the transaction are unsecured and yield 8% to 9%.
A follow-up transaction is planned before the end of the year and could total US$30 million, Finkelstein said.
Among other law firms involved in the deal, Orrick, Harrington & Sutcliffe provided counsel to OPIC.
While it's a first, the CLO is not the only noise micro-lenders have made this summer in the global structured-finance community. Last month, Mexican micro-lender Compartamos issued a bond enhanced by a partial guaranty from the International Finance Corp. (see ASR 8/2, p.22).
Microfinance entities are lenders offering small loans to entrepreneurs in developing countries.