World Bank sells $510 million loan obligation to attract investors

The World Bank Group on Friday confirmed the completion of its inaugural securitization transaction as part of a policy to attract institutional private capital into emerging markets.

The institution, through its affiliate, the International Finance Corporation, sold a $510 million collateralized loan obligation backed by loans it gave companies across the developing world.

The transaction includes a $320 million senior tranche sold to private investors, a $130 million mezzanine tranche insured by a consortium of credit insurers, and a $60 million equity tranche.

The shift from an “originate-to-hold” model to an “originate-and-distribute” model allows the World Bank to recycle its capital, expand its lending capacity, and support more countries and projects.

The CLO sale comes two years after an advisory group was commissioned in June 2023 to identify barriers to private sector investment in emerging markets and provide solutions.

The World Bank noted that repackaging of IFC loans into rated securities creates a new asset class for developing nations that meet institutional investment standards.

The securities can be sold to investors like asset managers, pension funds, and insurance companies that are willing to substantially raise their stakes in emerging markets.

“This is step one in an originate-to-distribute strategy that holds significant potential to attract private capital at scale,” said World Bank Group President Ajay Banga.

Banga conveyed his optimism that private investment mobilization would create jobs, help people climb out of poverty, and change families’ trajectory for generations.

World Bank sells $510 million loan obligation to attract investors