Bulgarian American Credit Bank II

completed

With assets and capital of about USD56 million equivalent and USD20 million equivalent respectively, BACB focuses on small and medium enterprises (SME) and mortgage lending. The bank''s loan portfolio of about USD52 million equivalent consists of 75% SME loans and 25% mortgage loans. BACB has been a leader in mortgage finance in Bulgaria. The bank successfully spearheaded the effort to draft and enact the Mortgage Bond Law, and, in July, 2001, was the first bank to issue a mortgage bond, which has since been listed locally. BACB has now asked for IFC''s financing for the proposed facility so as to support the growth of its mortgage finance business. The first part of the facility (Part A) would be a revolving line of credit to fund BACB’s portfolio of mortgage loans until they are refinanced through the issuances of mortgage bonds. The second part (Part B) would be for IFC’s participation in the bank’s mortgage bond issuances, in the form of either a subscription in or credit enhancement of a BACB mortgage bond. The facility should enable BACB to expand the reach of its mortgage origination. It is also envisioned that IFC participation in future BACB mortgage bonds would enable the bank to catalyze increased investor interest. The venture should also enhance the availability and affordability of residential mortgages in Bulgaria, and have a positive financial markets impact, as the volume of mortgage bonds and OTC market trading grows. Further, it would enable small entrepreneurs to use their home equity to secure small business (microfinance) loans, which are otherwise difficult to obtain.