Public sector (sovereign) financing

• Extended to developing member countries (DMCs) and public sector entities, such as state-owned enterprises
  - ADB uses a classification system to determine the eligibility of DMCs to borrow from ordinary capital resources (OCR) at near-market terms, at concessional OCR loan (COL) terms, or to receive grants from the Asian Development Fund (ADF); more information on these classifications, as well as the terms and conditions of loans granted to these DMCs, can be found on ADB’s website
• LIBOR-based loan (LBL): Indicative lending rates for ADB’s LIBOR-based loans can be found on its website
• Local currency loan (LCL): Reduces currency mismatches in DMCs
  - Available to private sector enterprises and certain public sector entities, including local governments and public sector enterprises
  - Under the LCL window, borrowers have the option of changing the interest rate basis of an LCL during the life of the loan by requesting an interest rate conversion to fix or unfix their interest rate, subject to regulatory approvals and relevant swap market opportunities available to ADB in the local market
• Concessional OCR loan (COL): ADB offers these loans at very low interest rates to the poorest DMCs
• Multi-tranche Financing Facility (MFF): Supports a client's medium- to long-term investment program or plan
  - ADB's Board of Directors approves a maximum amount for an MFF, and the conditions under which financing will be provided; on the basis of the Board's approval, and at the client's request, ADB Management converts portions of the facility amount into a series of tranches to finance eligible investments
  - A tranche can be a loan (other than program or a sector development program loans), grant, guarantee, or ADB-administered co-financing
  - Financing terms and conditions can differ between tranches
  - The overall amount of the MFF is not recorded as a legally binding financial commitment on the part of either ADB or its clients; only the amounts converted (into loans, grants, guarantees or ADB-administered co-financing) are recorded as committed, if and when approved

Private sector (non-sovereign) financing

• ADB offers hard currency loans, both senior and subordinated, as well as mezzanine financing; it also offers local currency loans in selective markets on a case-to-case basis
• Interest rates and other terms vary, depending on a company or project’s needs and risks
  - Rates: ADB provides floating-rate loans at a spread above LIBOR or EURIBOR, depending on the currency; it also offers fixed-rate loans at the fixed-rate swap equivalent of floating-rate loans
  - Fees: Typically, on floating-rate loans, ADB charges a once-only front-end fee as well as an ongoing commitment fee on the undisbursed balance; it may also charge a fee to cover upfront costs associated with due diligence
• Security: ADB will seek security appropriate for the loan and type of financing
• Equity investments: ADB may invest directly in an enterprise—it offers financing through equity investments, including direct equity investments in the form of common shares, preferred stock, or convertibles
  - Equity investments in enterprises, especially financial institutions, occur before an initial public offering
• - ADB does not seek a controlling interest in an investee company and will not assume any management responsibilities; it will, however, typically wish to reserve the right to appoint a nominee or an observer to the board of directors of each of its investee companies and to selected board committees, and will exercise voting rights as a shareholder
  - It will maintain regular contact with company management and require periodic reports on the progress of capital projects, operating performance, financial condition of the enterprise, and economic value added
  - ADB also requires reports on specific indicators for development outputs and outcomes, and monitors continued compliance with its environmental and social safeguards
• Guarantees: ADB provides guarantees that can be used to cover political risks, and more comprehensively, both political and credit risks
• B-loan/lender of record: ADB can mobilize additional debt resources for a financing through an arrangement in the form of a B-loan/lender of record structure
• Technical assistance: ADB offers technical assistance (TA), on a selective basis, for public and private sector operations
  - Transaction TA (TRTA): Directly benefits a project or is financed by ADB (e.g., project preparation, project implementation support, or policy advice); TRTA can also help develop a public–private partnership as part of transaction advisory services
  - Knowledge and support TA (KSTA): Includes all TAs other than transaction TA (e.g., general institutional capacity building, policy advice, and research)

Commercial co-financing

• Political risk guarantee: Covers transfer restriction, expropriation, political violence, contract disputes, and non-honoring of a sovereign obligation or guarantee
• Partial credit guarantee (PCG): ADB provides PCGs to lenders of most forms of debt, including commercial bank loans, loans made by shareholders, loans guaranteed by shareholders or third parties, capital market debt instruments, bonds, financial leases, letters of credit, promissory notes, and bills of exchange
  - PCGs cover nonpayment by the borrower or issuer (for any reason) on the guaranteed portion of the principal and interest due
  - PCGs can be applied to loans or other debt instruments issued by private and public sector projects (limited recourse financings), public–private partnerships, corporates, as well as (sub-)sovereign entities
• Loan syndication: Funded by commercial banks and other eligible financial institutions with ADB acting as lender of record; a direct ADB loan (A-loan) is required in the project to fulfill ADB’s direct participation requirement
• Unfunded risk participation: Enables ADB to transfer risk and to share returns and any associated recovery rights with respect to a loan provided by ADB with one or more risk participants (typically commercial banks)
  - Unfunded risk participation enjoys the same privileges and immunities as ADB’s A-loans

Trade Finance Program

• Credit guarantee: ADB issues a credit guarantee in favor of the participating confirming bank, covering up to 100% of issuing bank risk within 24 hours of request
• Risk participation: ADB enters into a risk participation agreement (RPA) with an accredited RPA bank allowing such to automatically bind the Trade Finance Program (TFP) to 50% of issuing bank risk in support of trade transactions
• Revolving credit facility: ADB provides loans directly to issuing banks in TFP countries of operation to support pre-shipment and post-shipment trade transactions
• ADB enters into a risk distribution agreement with insurers, export credit agencies, and other entities developing credit appetite in TFP countries, distributing and sharing issuing bank risk with them to leverage capital resources and credit limits

Supply Chain Finance Program

• Program profile:
  - Supplier: SME from DMC with minimum of 2 years relationship with buyer and solid production and delivery track record
  - Buyer: Established corporate rated at least BB or its equivalent, and located anywhere
  - Eligible goods: Goods, commodities, and equipment
  - Transactions supported: Cross-border and domestic trade transactions
  - ADB participation type: Loan or guarantee
  - Exposure limits: Varies based on credit assessments
  - Tenor: Up to 180 days
  - Coverage: ADB takes up to 50% of the risk per transaction (never exceeding partner financial institution’s exposure)
  - Currencies: USD, EUR, JPY, and CNY; local currency programs may be approved on a case-by-case basis
  - Cost: No sign-up cost; participation fees apply