MIGA Backs Landmark Securitization Deal: Brazilian health care to benefit

MIGA Backs Landmark Securitization Deal: Brazilian health care to benefit

Washington, DC, September 5, 2000 — In a move that breaks new ground for financing in developing countries, the Multilateral Investment Guarantee Agency (MIGA) has issued a $90 million guarantee for the securitization of loan and lease receivables from the financing of medical equipment in Brazil.

MIGA provided the guarantee to MSF Funding LLC (MSF), whose parent company, MSF Holding Ltd., provides loan and lease financing for the supply of high technology diagnostic imaging and radiation therapy equipment to hospitals, physician groups, and clinics throughout Latin America.

MSF has issued floating-rate notes on the international capital markets, based on the company’s future leasing revenues. The notes are secured by US dollar-denominated financing contracts in Brazil. The MIGA guarantee will protect MSF’s ability to convert funds generated in local currency into US dollars and to transfer them outside the country, as well as guaranteeing the company against expropriation of its Brazilian bank accounts.

"This is the first capital markets issue supported by MIGA, and the first internationally rated securitization of Brazilian loan and lease receivables from the financing of medical equipment—marking a milestone for both MIGA and Brazil," said Vice President for Guarantees, Roger Pruneau.

MSF will use the proceeds of the financing to originate new loans and leases in Brazil, where specialized medical equipment of this type is in short supply and much of what exists is obsolete. The equipment to be financed includes magnetic resonance imaging, CAT scanners, and other medical devices, which will help improve the quality and cost-efficiency of the country’s health care services, particularly for cancer patients.

The project is expected to have many direct and indirect developmental benefits. Highly skilled doctors will train local medical staff in the equipment’s use, and allow Brazilian doctors to provide improved care to patients.

"This is an important ‘first’ for DVI and its partners," said Michael A. O’Hanlon, president and chief executive of DVI, Inc., the majority owner of MSF Holding Ltd. "It represents another major step in the groundbreaking initiative set out in 1998 when we formed MSF Holding Ltd. This securitization establishes a funding platform that will enable us to offer financing of medical equipment for all of Latin America."

MIGA proved key to improving the risk profile of the notes and helping the investor secure the financing needed, enabling the issue to be rated above Brazil’s local and foreign currency ratings. The Class A Notes received an A2 rating from Moody’s Investor Services, and an A rating from S&P and Fitch IBCA. The Class B Notes were rated Baa2 and BBB respectively, and the Class C Notes received a BB rating.

MIGA reinsured its guarantee with eight Lloyd’s of London syndicates and with the Netherlands Development Finance Co. (FMO). FMO is also a shareholder in MSF Holding Ltd., together with the International Finance Corporation, a member of the World Bank Group, and Philadelphia International Equities.

"We hope this pioneering transaction will open the way for more companies to use this mechanism to raise capital for much-needed investments in other developing countries," added Pruneau.

For information:
Peter Jones, pjones1@worldbank.org,
tel: (202) 458-0443