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Decrease in Fixed Spread of IBRD Flexible Loans

 

 

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IBRD Loan Pricing

IBRD Financing

 

As of 12:01 a.m. Washington, D.C. time, April 5, 2012, the fixed spread over LIBOR for new US dollar IBRD Flexible Loans (IFLs) will decrease due to a reduction in projected funding costs for these loans. The specific decrease will vary from 0.05% to 0.10% depending on the average repayment maturity of the new loan at commitment (i.e., at Board approval). (1)

There has also been an adjustment in the projected basis swap (2) for loans with a fixed spread denominated in euro and Japanese yen. As a result, the fixed spreads will be 0.05% lower for euro-denominated loans and 0.15% lower for yen-denominated loans compared to the corresponding US dollar fixed spreads, regardless of average repayment maturity. Loans denominated in pound sterling will continue to have the same spreads as US dollar loans.

The new fixed spreads shown in the table below apply to all loans signed on or after April 6, 2012, local time at the place of signing.

  For IBRD Flexible Loans with a Fixed Spread
Signed on or after April 6, 2012

Average Repayment Maturity* (years)

Up to 12*
Greater than
12 to 15*
Greater than
15 to 18*
Contractual Spread
+0.50%
+0.50%
+0.50%
Maturity Premium
N/A
+0.10%
+0.20%
Market Risk Premium
+0.10%
+0.10%
+0.15%
Projected Funding Cost
-0.10%
+0.00%
+0.15%
USD Lending Rate
LIBOR +0.50%
LIBOR +0.70%
LIBOR +1.00%
Change from Previous Pricing
-0.10%
-0.10%
-0.05%
EUR Lending Rate**
Euribor +0.45%
Euribor +0.65%
Euribor +0.95%
JPY Lending Rate**
LIBOR +0.35%
LIBOR +0.55%
LIBOR +0.85%
GBP Lending Rate**
LIBOR +0.50%
LIBOR +0.70%
LIBOR +1.00%

* As measured by average repayment maturity of the loan at commitment (1).
** A basis swap adjustment of -0.05% is applicable to EUR fixed spread and -0.15% is applicable to the JPY fixed spread.

The decrease in the fixed spreads is the result of a reduction in projected funding cost, a technical component of fixed spread pricing, which Bank management reviews at least quarterly to ensure that it reflects evolving, underlying market conditions. The contractual lending spread and maturity premiums, set by the Board, remain unchanged. This change does not affect the pricing of IBRD Flexible Loans with a variable spread.

Click here for more information on IBRD lending rates. For more information, please contact us at FAB@worldbank.org.

1. For existing variable spread loans that are later converted to a fixed spread, the fixed spread applied will be based on the remaining average repayment maturity of the loan on the fixing or conversion date.
2. The basis swap refers to the difference between IBRD fixed spread loan pricing in US dollars and other major currencies.