Private Sector (Nonsovereign) Financing
A core component of ADB's mission is to mobilize capital from a range of sources to our markets and our clients. We actively partner with commercial banks, impact investors, institutional investors, and development finance institutions to cofinance ADB projects. To achieve the objective of broadening the cofinancing base, ADB adopts several different arrangements.
A/B Loan Structure
The A/B Loan product allows commercial lenders to partner with ADB in its lending operations and broader development mission. Through this program ADB, as lender of record, extends a loan to a borrower funded by commercial participants and ADB. The portion funded by ADB is referred to as the A Loan and the portion funded by commercial lenders referred to as the B Loan. Commercial lenders enter the transaction via a participation agreement to become participants, and through this mechanism each commercial participant may benefit from ADB's Charter-based privileges and immunities as well as ADB’s preferred creditor status.
The A/B Loan allows ADB to introduce new financing sources to its clients, mobilizing more funds for development projects. ADB partners with reputable commercial financial institutions that can act as B Loan participants – international and regional commercial banks, institutional and impact investors – provided they are not incorporated or residing in the country of the borrower or project. Through this diverse and growing investor base, ADB can assist borrowers by assembling syndicates to help finance their transactions.
Complementary Loan Structure
ADB has developed a Complementary Financing Scheme to partner with commercial banks and other eligible financiers in transactions where the project or company cashflows are predominately in local currency. The mechanics are similar to the B Loan program – commercial lenders participate in the transaction using an onshore entity via a Participation Agreement and ADB acts as a lender of record for both the A Loan and the Complementary Loan (C Loans).
Parallel Loan Structure
ADB also delivers financing solutions to its clients by acting as an arranger and structuring financings in coordination with other lenders. This is known as a Parallel Loan structure where each lender has a direct claim on the borrower. In most cases, all co-lenders sign a common terms agreement (CTA) with and the borrower which defines the overall terms of the transaction. Under the CTA, each co-lender may enter into a supplemental loan agreement with the borrower to address any terms specific to the lender.
Under this financing structure, co-lenders do not benefit from ADB’s preferred creditor status and its privileges and immunities.
Green bonds and climate bonds deepen local currency–denominated capital markets by attracting new institutional and financial investors. Green bonds lessen the reliance on banks as the primary source of financing, provide new investment and savings products, and enhance transparency and corporate governance. ADB’s value addition consists of its expertise in climate and environmental issues, the support ADB can provide to the issuer to obtain formal green bond certification, and the confidence that ADB creates in investors by acting as an anchor investor.
