BBM II

completed

Banco BBM S.A. (BBm, the Bank or Banco BBM), which was founded in 1858 and is the country’s oldest private-sector bank, is one of Brazil’s leading medium-size financial institutions. It provides a range of credit, loan, and derivative products to smaller as well as mid-sized corporates; has an active – but prudently managed – proprietary trading business; and offers third-party asset management services to investors. As a result of its long history and very conservative business culture, BBM’s operations are characterized by robust credit structuring skills, as well as state-of-the-art risk management systems.In June 2006, IFC committed and disbursed to Banco BBM the local currency-equivalent of US$50 million, in order to support expansion of the Bank’s credit activities involving mid-sized corporate borrowers (the Original Credit or BBM I). This was the first, major, long-tenor credit transaction undertaken by IFC aimed at supporting the operations of a medium-size Brazilian bank. It was also the first, significant, local currency-indexed debt financing executed by IFC in Brazil.With an increase of nearly 100% from June 2005 to June 2006, the expansion of BBM’s credit portfolio has exceeded expectations. As a result of this growth, the Original Credit has been fully drawn down, and the Bank is currently seeking additional long-tenor funding. The project involves a subscription by IFC of a second cross-border, local currency-indexed note to be issued by BBM, for an amount up to $50 million-equivalent. The relevant credit exposure will have a bullet maturity of 7 years. Funding proceeds from the transaction will be used by the Bank to further expand its lending activities involving mid-sized corporates. Furthermore, the project will require BBM to book a certain percentage of the transaction’s funding proceeds as loans with longer tenors than it extends on average at present, and to also on-lend a percentage of transaction funding proceeds to smaller corporates (with sales below a predetermined threshold).