Gabriel L. Valdes, and Fradyn Suarez (J. Albert Diaz)
Dealmakers: Fradyn Suarez and Gabriel Valdes
The Deal: The Hunton & Williams attorneys advised the Inter-American Development Bank on a $115 million so-called A/B loan to Brazil’s Banco Pine.
Details: As part of the advisory legal panel for private sector projects, Hunton & Williams’s role is to protect the IDB, a primary source of development financing for Latin America and the Caribbean. Hunton’s job was to pay attention to the details of complicated cross-border deals for the Washington-based bank owned by its 48 member countries.
When prospective borrower Banco Pine wanted financing to fund biofuel and other environmentally sustainable projects, structuring the loan that closed in December was only a fraction of the work involved in wrapping up the deal.
The commercial borrower wanted funding for loans to customers pursuing the Brazilian government’s goal of refocusing the country’s energy matrix by 2021. When Hunton & Williams advised the IDB on the loan, the Miami attorneys had to look far beyond the initial client.
“The most challenging aspect of this transaction was working through the environmental protocol that was implemented in order to permit Banco Pine and its personnel managers to be able to identify and source projects to ensure that the funds were going to be used for green projects,” Suarez said. “On top of the fact that the IDB was lending $115 million, a lot of the effort went to ensuring that the project actually fit within the initiative. The whole purpose was to ensure that it reduced climate change.”
The attorneys started with an A/B loan structure with the IDB serving as the lender of record, offering a $75 million “A” loan. The IDB then partnered with German bank Commerzbank AG, which served as the “B” lender, to provide the remaining $40 million.
The deal allowed the commercial lender to benefit from the IDB’s tax immunity, preferred creditor status and other perks from Latin American and Caribbean governments.
For Banco Pine, it meant an “A” loan with up to a five-year tenor and a three-year grace period and a “B” loan with a two-year tenor.
Next, Suarez and Valdes needed to ensure the money would serve its intended purpose. The pair coordinated teams of environmental and social experts in two countries to draft policies to ensure the IDB program would fund only subloans that adhered to the original goal of finding clean energy sources. They spent weeks working on policies to identify, screen, categorize, assess and monitor the environmental and social aspects at a subborrower level to create a system that supported the long-term goals.
Such deals are increasingly a routine part of the job description for the firm’s Miami office, which won a hard-fought race for one of seven positions on the IDB’s legal panel in January 2013.
Quote: “This is an important thing about the IDB,” Suarez said. “It’s not only a lender. It also spends a lot of money training and providing technical advice in Latin America.”
Background: Suarez is a corporate and finance partner and Valdes is an associate in the Miami office of Hunton & Williams. In August, the firm helped negotiate a currency loan backed by payroll deductions for a Mexican government agency to improve housing conditions for about 80,000 workers. Complicated by a lending structure that swapped dollars for pesos, the deal also required the attorneys to do strict due diligence on the bank’s payroll deduction program.