48064 - BAC ES Debt

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Summary of Investment Information

Project Number

48064

Company Name

BANCO DE AMERICA CENTRAL S.A.

Date SPI Disclosed

Jul 17, 2024

Country

El Salvador

Region

Latin America and the Caribbean

Projected Board Date

Aug 16, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jan 5, 2025

Department

CF6L1 - Regional Industry FIG LAC & EUR/FIG LAC 1 Mex, CA & Caribbean

Industry

Financial Markets

Previous Events

Approved : Nov 12, 2024
Signed : Dec 17, 2024
Invested : Jan 3, 2025

Sector

Commercial Banking - General

Project Description

The proposed project is an up to US$190 million financing package for Banco de America Central, S.A. (BAC ES or the Bank), consisting of: (i) an up to US$30 million senior unsecured A loan for IFC's own account (IFC A Loan), part of which benefits from US$15 million unfunded mobilization through the Managed Co-Lending Portfolio Program (FIG III program), in which IFC will transfer the credit risk to insurance companies, which results in a net IFC own account exposure of not more than US$30 million; (ii) up to US$120 million mobilization package through a B Loan facility; and (iii) an unfunded trade finance facility under IFC’s Global Trade Finance Program (GTFP) of up to US$40 million with BAC El Salvador. (the Project).

The loan proceeds will be used to fund the growth of the Bank's climate-smart assets (including green mortgages and blue assets) and small and medium-sized enterprises (SMEs) including women SMEs (WSMEs).

The trade line will support short-term trade finance activities. The trade finance activities supported by the Project will be required to meet the requirements of the IFC's Exclusion List and other exclusions deemed necessary. The Project will not support any activities with significant E&S concerns such as: (a) involuntary resettlement; (b) risk of adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks. It will also not support any activities related to upstream oil & gas production and activities related to coal such as coal mining, coal transportation, coal-fired power plants, or infrastructure services exclusively dedicated to support any of these activities. IFC will review the details of the underlying trade transactions to confirm that they do not include activities in the IFC Exclusion List and any other exclusions.

Associated Advisory Engagement

Banking on Women (BOW) Advisory-

The Loan could also be complemented with a BOW advisory engagement which will first provide a diagnostic of the Bank’s existing portfolio of loans to women entrepreneurs and identify opportunities to build a BOW in retail SME and commercial lending strategy, including the ability to structure new products to finance for WSMEs. Advisory Services will deepen the Bank’s ability to reach women-owned businesses through strategic planning, market positioning and segmentation, product redesign and staff training. In the absence of this assistance, the Bank’s rollout of its BOW offerings would be subject to greater uncertainty that would lead to slower expansion of credit to women entrepreneurs and reduced financial inclusion for female entrepreneurs.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
Equity

Development Impact

Stakeholders effects: Increased access to finance for SMEs including WSMEs: IFC expects the Project will support the Bank to grow its SME portfolio. El Salvador is ranked 124th (from 190 countries) based on the 2018 Gender Inequality Index. Women-led businesses are typically constrained by access to credit versus men-led businesses. Stakeholders effects – Improved access to finance for climate-smart assets, including energy efficiency, green building, and climate-smart agriculture projects: IFC expects that this Project will provide access to finance for climate-smart assets projects in El Salvador. In addition to the country’s heightened vulnerability to climate risks, its GHG emissions have been increasing, amounting to 15 million metric tons of MtCO2 equivalent per year in 2015 (i.e., 2 MtCO2 equivalent per capita in 2015). The Project will be complemented with supplementary advisory services aimed at helping the Bank establish a climate finance line of business. Contribution to Market Creation: Sustainability. Given the relatively underdeveloped state of the climate finance market in El Salvador, IFC’s engagement will promote green financing standards, through (i) capacity building (ii) market awareness; and (iii) client monitoring/certification processes. The climate initiative will support BAC ES expand and diversify its operations in climate finance in the country.

Financial Additionality Financing structure: IFC will provide direct senior financing to BAC ES of up to [US$30] million and a tenor of up to three years (one year grace period), a structure which is not readily available in the Salvadoran market. This structure will provide the Bank with longer-term funding, enabling the bank to extend longer-term loans to its clients. The additionality benchmarks collected show there have been neither USD syndicated loans nor USD corporate bond issuances at a corresponding rating of B+/- in the financial services sector over the past 12 months in El Salvador. BAC ES’s funding is mainly concentrated in deposits (86.4% of total liabilities), which limits the Bank’s ability to extend long-term financing to its clients while at the same time maintaining an adequate asset-liability mismatch profile. Resource mobilization: Through the proposed Project, IFC will mobilize funds from international investors, including commercial banks, impact investors and possibly other DFIs, to provide senior financing to BAC ES in an amount of up to [US$30] million via a B Loan/Parallel Loan. It is expected that some private sector institutional investors will be comfortable with joining this transaction considering the benefits of the IFC umbrella under the B Loan. Non-Financial Additionality Knowledge, innovation, and capacity building: IFC is expecting to support Group BAC Credomatic on its regional climate finance initiative through an advisory services project aimed at helping the Group design and implement its climate smart strategy for Central American Region. The advisory engagement in El Salvador would comprise: (i) the development of a country diagnostic report regarding the state of sustainable construction and green buildings; (ii) capacity building activities within the Bank’s staff; (iii) market awareness events with key local stakeholders; and (iv) one-to-one client monitoring throughout the certification process for constru

E&S Category Rationale / Risks and Mitigation

Potential E&S risks and impacts associated with the Project are expected to be medium, therefore it has been categorized as FI-2 according to IFC's Sustainability Policy. The Project will not support activities on IFC Exclusion List, coal related sub-projects, hydro energy projects, solar, offshore wind, and Higher Risk transactions that may include (i) involuntary resettlement; (ii) risk of adverse impacts on indigenous peoples; (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; (iv) risk of significant retrenchment; and/or (v) significant occupational health and safety risks. The main environmental and social (E&S) risks and impacts related to the Project derive from the Bank’s capacity to screen out Higher Risk Transactions as well as to properly identify, assess, and manage the E&S risks of a supported portfolio in line with the IFC requirements. The Bank’s E&S risks associated with the supported portfolio are mainly related to occupational, health, and safety, waste management, biodiversity, community impacts, and labor issues.

Applicable E&S requirements for the Project will be the IFC Exclusion List, applicable national E&S laws and regulations, and screening out Higher Risk transactions as contemplated in the Performance Standards. As part of the Project, the Bank will be required to enhance its ESMS to include screening of SME and climate-related sub-projects against national E&S laws, higher risk activities, and supply chain risks. The bank will also be required to: (1) maintain its ESMS procedures; (2) remain committed to applying the labor standards established by the IFC Performance Standard; and (3) submit a periodic report to IFC. Due to the nature of this transaction sub-projects disclosure requirements are not applicable.

BAC El Salvador is an IFC's new client. The Bank is part of BAC Credomatic Group, Central America's largest financial group. The Group adheres to the UNEP's Principles of Responsible Banking and is a signatory of the UN Global Compact and Financial Alliance for Women. BAC El Salvador has an Environmental and Social Management System (ESMS) in place. The Bank’s E&S Policy contemplates conducting risk assessments against restricted activities and national laws. The Bank has a local E&S team as well as E&S capacity to manage potential risks. The Bank's environmental and social performance is disclosed at the Bank's website (https://baccredomatic.com/es-sv/nuestra-empresa/sostenibilidad).

The Bank has a functioning external communication mechanism. Through various channels, including website and corporate contact, BAC EL Salvador can receive and respond to third party concerns.
The Bank’s life and fire safety practices as well as labor practices are largely aligned with IFC Performance Standards (PS) 4 and 2.

Contacts

For Inquiries About the Project, Contact

Banco de America Central, S.A.
Carolina Calderon
Gerente de Tesoreria
(503) 2206-4871 ext 4871
carolina.calderon@baccredomatic.sv
CENTRO ROOSEVELT, 55° AV. SUR ENTRE ALAMEDA ROSSVELT Y, Av. Olímpica EDIFICIO D, EL SALVADOR, El Salvador
www.baccredomatic.sv

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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