AfDB debuts with synthetic securitisation

The African Development Bank (AfDB), the European Commission, Mariner Investment Group (Mariner), Africa50, and Mizuho International have priced a $1 billion synthetic securitization of a portfolio of pan-African credit risk. Named Room2Run, the deal is the first portfolio synthetic securitisation by a multilateral development bank to be placed with private sector investors and may prove to be the template for making DFI lending budgets stretch a lot further.

Structured by Mizuho International, Room2Run transfers the mezzanine credit risk on a portfolio of approximately 50 loans from among the AfDBs non-sovereign lending book, including power, transportation, financial sector and manufacturing assets across the African continent.

Alternative asset manager Mariner is lead investor in the deal through its International Infrastructure Finance Company II fund (IIFC II) which is taking around 80% of the notes. Africa50 is also taking 20% of the issue. The pair are taking on default risk of up to $152.5 million on the portfolio. The average life of the securitisation is around seven years and the final maturity is the same as the long-dated loans. Additional credit protection – equating to around 10% of the risk – is being provided by the European Commission’s European Fund for Sustainable Development in the form of a senior mezzanine guarantee.