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"B" Loans and Political Risk Insurance: Different Roads to the Same Destination Apr 01
Standard & Poors, April 2001
Abstract
Lenders taking foreign-currency credit exposure to private-sector issuers in emerging market countries have long been concerned that foreign exchange controls might prevent these issuers from servicing their obligations. Two means of mitigating this risk-participations in loans made by select multilateral institutions (so-called 'B' loans) and 'political risk insurance'(or, more specifically, transfer and convertibility [T&C] insurance)-have become more prominent since both were tailored to meet the requirements of the capital markets (see 'How Preferred Creditor Support Enhances Ratings,' RatingsDirect, June 15, 1999, also at www.standardandpoors.com under ResourceCenter-RatingsCriteria-Sovereigns; and 'Political Risk Insurance May Enhance Emerging Market Structured Transactions,' RatingsDirect, Nov. 2, 1999, also at www.standardandpoors.com under ResourceCenter-RatingsCriteria-StructuredFinance in Securitization in Latin America 2000). Neither the 'B' loan structure nor T&C insurance enhances...
Companies mentioned in this report are: Asian Development Bank,Inter-American Development Bank,International Bank for Reconstruction and Development,Brazil (Federative Republic of),Turkey (Republic of),International Finance Corp.,European Bank for Reconstruction and Development,Mexico,Transportadora de Gas del Norte S.A. (TGN),ACE Bermuda Insurance Ltd.,Kuwait (State of),Salta Hydrocarbon Royalty Trust
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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