MIGA Uses Non-Honoring of Sovereign Financial Obligations Cover to
Back Rated Capital Markets Transaction
Hungary Exim bond issue expected to benefit mostly small and medium-sized exporters
Washington, September 24, 2013 - The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance and credit enhancement arm of the World Bank Group, today announced its intention to support a €400-million financing backed by notes to be issued by Magyar Export-Import Bank (Exim) of Hungary. Specifically, MIGA’s guarantee will be providing coverage against non-honoring of the sovereign financial obligation for the principal and interest on the bond notes. This will represent MIGA’s first use of this cover for a capital markets issue. As Hungary’s official export credit agency is wholly-owned by the government, Exim’s liabilities are secured by a government guarantee.
Hungary’s exporters, many of which are small and medium enterprises, will benefit from the savings in borrowing costs that will be passed along to them. MIGA's support significantly enhanced the credit quality of the issue (from non-investment grade to AAA) and will lower the longer-dated borrowing costs of Exim.
Since the onset of the global economic crisis, lending to Hungarian businesses has declined sharply. At the same time, credit demand has remained robust—especially in the still-buoyant export sector. In this context, Exim plays an important role for the Hungarian economy: as domestic consumption and investment have also declined sharply, outward-looking sources of economic activity are critical.
In addition, Exim closely cooperates with Hungarian commercial banks in order to reach small and medium enterprises through their distribution networks, as it does not possess its own branch network. This cooperation supports the stability of the Hungarian banking sector as Exim provides long-term refinancing facilities, strengthening liquidity.
“We’re very enthusiastic about our support to this bond issue, which will mark the first time we will be using MIGA’s non-honoring of financial obligations cover in this way,” said Keiko Honda, MIGA’s Executive Vice President. “It’s a true demonstration of how our products can be used innovatively to support market-based approaches to enhance development across the globe.”
MULTILATERAL INVESTMENT GUARANTEE AGENCY
A Member of the World Bank Group
1818 H Street, NW, Washington, DC 20433
Mallory Saleson, MIGA
Tel: +1 202 473-0844
Rebecca Post, MIGA
Tel: +1 202-473-1964
Cara Santos Pianesi