World Bank Sells $510 Million of Bonds Backed by Loans to Companies in Developing Markets

The World Bank sold $510 million of bonds backed by loans it gave companies across the developing world, part of its efforts to lure more institutional investors to regions where borrowers have a harder time raising cash.

The development bank’s finance arm has bundled up exposures in loans it made to 57 companies across regions like Eastern Europe, South America and Asia, according to Yinni Li, credit analyst at Moody’s Ratings. Borrowers included companies in the food and beverage as well as telecommunications industries, Moody’s said in a note.

Although a first-of-its-kind deal for the World Bank, this type of transaction is widely known to those on Wall Street as a collateralized loan obligation. That structure faced skepticism after the 2008 financial crisis, but it’s since gained wide acceptance. Like other kinds of securitizations, CLOs help relieve lenders of the burden of holding onto loans after they’ve been created by transferring much of the risk to bond investors.

Goldman Sachs Group Inc. helped build the deal for the World Bank, according to people familiar with the matter, who asked not to be identified discussing private information. Banga previously said the World Bank was working with Goldman Sachs on the deal.

Representatives for the World Bank’s finance arm and Goldman Sachs declined to comment.

The World Bank has signaled its plans to deploy new financial products as part of a bid to scale up its investments in developing nations. It said in a November presentation that it was designing a new program to build an asset class of emerging-market securitizations, with plans for multiple deals. The goal is to allow the World Bank to invest more by letting private institutions take loans off the lender’s balance sheet, Bloomberg reported.