Over the past few years the Bank has widened considerably the geographical scope and sources for its funds to support its increased volume of lending. In addition to its traditional bond issues in the United States, the Bank has placed issues in significant amounts in Germany and, recently, in Japan. It has also increased its resources through borrowings in Kuwait, the Libyan Arab Republic, the Netherlands, Saudi Arabia, and Switzerland and through the sale of two-year bonds to central banks throughout the world.
During the quarter ended March 31, 1971, the net borrowings of the Bank increased by $442 million. The outstanding funded debt of the Bank amounted to $5,363 million on that date.
In January, the Bank entered the intermediate - term market in the United States as part of its long-range borrowing program designed to offer the Bank obligations from time to time in a variety of maturities both inside and outside the United States. The Bank offered $200 million of five-year notes dated January 15, 1971 and maturing January 15, 1976.
The intermediate-term notes were offered by a new group of underwriters, different from the managers and underwriters of the Bank’s long-term issues in the United States. The group for intermediate term borrowing was headed by The First Boston Corporation, Morgan Stanley & Co., and Salomon Brothers.
Netherlands Guilder Notes
In December the Bank also entered the Netherlands market with a placement of f. 60 million ($16.6 million) 7 3/4 per cent Five-Year Notes. These notes were placed with nonresidents of the Netherlands and the United States by a syndicate of Dutch banks headed by Algemene Bank Nederland N.V. Other members of the syndicate were Amsterdam-Rotterdam Bank N.V., Bank Mees en Hope N.V., and Pierson, Heldring en Pierson.
This was the second Netherlands guilder obligation of the Bank offered in December. Earlier a syndicate of Dutch banks offered for public sub-scription in the Netherlands f. 60 million of 8 1/4 per cent Fifteen-Year Bonds.
$200 Million Bank Bond Issue
In March, the Bank announced the placement of a $200 million issue of U.S. dollar bonds maturing March 15, 1973 in markets outside the United States. The bonds were purchased by central banks and other government institutions of 67 different countries and by one international organization. The sale of these bonds will increase to $724.5 million the amount of Bank two-year dollar bonds held by these and other similar purchasers.
The new Bank bonds, known as “Two Year Bonds of 1971, due March 15, 1973,” bear interest at 5.20 per cent per annum, payable semiannually. The issue was sold at par.
|COUNTRY||PURPOSE||AMOUNT ($ millions)|
|Ecuador||Development Finance Company||8.00|
|Total loans signed during the third quarter|
of fiscal 1971
|Loans signed during the first half|
of fiscal 1971
|Total loans signed during the nine months|
ended March 31, 1971
Yen Loans to the Bank
During the quarter under review, the Bank of Japan made two loans totaling $200 million (¥72 billion). The loans carry interest at the rate of 7.43 per cent per annum.
In all the Bank of Japan has granted four loans to the Bank. The first two, amounting to ¥ 36 billion each were granted in February and March. The two transactions undertaken during the quarter bring to the equivalent of $400 million the amount of funds recently made available to the Bank by the Bank of Japan.
The Consultative Group for Colombia held its fifth meeting in February. The Group discussed a Bank report on the country’s current economic situation and prospects, and considered Colombia’s needs for external financing in the next two years. Dr. Alfonso Patino Roselli, Minister of Finance, who headed the Colombian delegation, summarized the progress made since the fourth meeting of the Group, and explained the country’s policies in the fields of fiscal reform, agriculture, industry, and balance of payments management, and the steps taken to expand exports other than coffee. The Group agreed that the country’s recent economic performance and its development prospects, assuming the program outlined by the Colombian delegation is implemented, justify continued assistance by the Group.
The meeting was attended by representatives of the Governments of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom, and the United States. In addition, the Colombian delegation, representatives of the Fund, the United Nations Development Program, the Inter-American Development Bank, and the Inter-American Committee for the Alliance for Progress were present. The International Coffee Organization, the Organization for Economic Cooperation and Development/Development Assistance Committee, and Switzerland were represented by observers.
Capital Markets Department
The International Finance Corporation (IFC) has established a Capital Markets Department, specifically designed as the focal point in the World Bank Group to encourage the growth of capital markets in developing countries. The new department pays special attention to identifying problems of capital market development and to finding ways of solving them.
The new department provides assistance mainly in two ways. First, it helps governments and private groups, at their request, in setting up and supporting institutions to channel domestic savings into productive private enterprise. Such institutions could be mortgage banks or savings and loan associations; they could also be underwriting syndicates, investment trusts, discount houses, merchant banks, or stock exchanges. Second, in countries where securities are already traded locally, the new department gives advice on ways to encourage wider share ownership and to increase the choice of stock holdings available to local investors.
One of the ways by which IFC has helped in developing local capital markets is through its underwriting and stand-by commitments, which now total $50 million for 17 companies in 11 countries.
Underwriting in Venezuela
IFC made a stand-by commitment in January to purchase up to approximately $2 million of a new $5.6 million issue of mortgage bonds of Consolidada de Cementos, C.A.(CONCECA), a leading cement producer. The underwriting syndicate was headed by C. A. Venezolana de Desarrollo (Sociedad Financiera), a development finance company which IFC helped to set up in 1963. The public offering commenced on January 15 and ended a month later with the total issue being sold in Venezuela. IFC’s commitment enabled the syndicate to underwrite a larger bond issue than it otherwise would have undertaken.
Conceca’s share of the Venezuelan cement market has averaged about 16 per cent over the past few years. It supplies the states of Aragua, Carabobo, and Falcon and exports small amounts.
|COUNTRY||PURPOSE||AMOUNT ($ millions)|
|Congo, People’s Rep. of the||Education||3.50|
|El Salvador||Electric Power||5.60|
|India||Agriculture - Aerial Spraying||6.00|
|Total credits signed during the third quarter of fiscal 1971||93.50|
|Credits signed during the first half of fiscal 1971||120.90|
|Total credits signed during the nine months ended March 31, 1971||214.40|
Oil Refinery Investment
IFC made an $8 million loan and equity commitment in February to Philippine Petroleum Corporation (PPC), a new $33.4 million refinery for the production of lubricating oil base stocks. Scheduled to start commercial operations in early 1973, PPC will have an initial annual capacity of 1.1 million barrels of lubricating oil base stock. A 40 per cent expansion is planned after two to three years of operations.
PPC’s output will be sold to oil companies operating in the Philippines, replacing imports. The new refinery will also market its fuel oil by-products. At full capacity, in 1979, the project is expected to achieve net foreign exchange savings of over $11 million a year. The refinery will employ about 180 people.
The project is sponsored by Meralco Securities Corporation (MSC), a Philippine holding company involved in electric power supply, pipeline systems, construction, and manufacturing. It is expected that most of the six major oil companies marketing in the Philippines will subscribe to PPC’s equity capital.