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Conversion Options for the IBRD Flexible Loan (IFL)

 

Looking to manage currency or interest rate risks on other IBRD loans or debt owed to creditors other than IBRD?  Click here for IBRD Hedging Products.

 

Conversion Guidelines
(pdf, 800KB)

Request Forms (xls, 80 KB)
Interest Rate Conversion
Interest Rate Cap or Collar
Automatic Rate Fixing

Currency Conversion: Outstanding Loan Amounts

Currency Conversion: Unwithdrawn Amount

Fixing the Spread (moving from variable to fixed spread)


Related Content

March 12, 2012:
IBRD Offers Borrowers of Loans with a Variable Spread Additional Flexibility to Manage Financial Risks

 

 

Currency: All or part of the disbursed or undisbursed balance may be converted into a currency which IBRD can efficiently intermediate. Disbursed balances relating to local expenditures may also be converted into the borrower’s local currency subject to the availability of a liquid swap market in the local currency. Note: Based on market conditions, IBRD may be unable to offer fully deliverable transactions for local currency conversions and may therefore limit offerings to non-deliverable conversions.

Interest Rate Basis: For IFLs with a fixed spread, the variable lending rate (i.e. the reference rate – typically LIBOR or EURIBOR – plus the fixed spread) on the disbursed balance may be converted to a fixed rate and vice-versa. For loans with a variable spread, the reference rate on the disbursed balance may be converted to a fixed rate and vice-versa, while maintaining the variable spread. The borrower may exercise this option at any time during the life of the loan for all or part of the disbursed and outstanding balance. IFLs with a variable spread that are subject to the General Conditions dated July 31, 2010 or earlier require an amendment to the loan agreement in order to fix and unfix the reference rate while maintaining the variable spread.

Automatic Rate Fixing: The borrower may direct IBRD to undertake automatic rate fixings through interest rate conversions, executed at regular time intervals, or upon certain levels of disbursements. The borrower may exercise this option on all or part of the amounts to be disbursed and cancel this automatic rate-fixing arrangement at any time.

Interest Rate Caps/Collars: For IFLs with a fixed spread the borrower may opt to cap (set an upper limit) or collar (set upper and lower limits) on the variable lending rate (i.e. the reference rate plus the fixed spread) for up to the entire disbursed amount. For IFLs with a variable spread, the borrower may opt to cap (set an upper limit) or collar (set upper and lower limits) on the reference rate portion of the lending rate for up to the entire disbursed amount. IFLs with a variable spread that are subject to the General Conditions dated July 31, 2010 or earlier require an amendment to the loan agreement in order to employ a cap or collar on the reference ration portion of the lending rate while maintaining the variable spread.

Requesting Conversions: Please refer to the Guidelines for Conversion of Loan Terms for procedures on requesting, accepting, and effecting conversions of the terms of IFLs. After downloading the form(s), please fill in the required fields. Fax completed form(s) to the number provided on the form.

Transaction Fees: Expressed as a percentage per annum on the outstanding loan amount unless otherwise indicated.

Transaction Type

For Fixed   Spread Loans

For Variable Spread Loans
Interest Rate Conversion
Initial rate fixings for up to the full maturity of the loan for amounts up to the outstanding loan amount
No Charge (1)
0.020%
Additional rate fixing/unfixing 0.010% 0.030%
Interest Rate Caps/Collars (2)  0.125% 0.125%
Currency Conversion
Of undisbursed loan amounts (2)  0.125% 0.125%
Of disbursed loan amount (3)  0.020% 0.040%
Automatic currency conversion to local currency (3) 0.010% 0.030%
Changing from variable spread to fixed spread
 N/A
0.030% (4)

1. Borrowers of loans with a fixed spread have the opportunity to obtain a fixed interest rate for the full original loan amount and maturity without a transaction fee. If IBRD is unable to execute an interest rate swap for the full loan maturity and has to execute two interest rate swaps to fix the interest rate for the full loan maturity, neither interest rate fixing will bear a transaction fee.
2. Expressed as a percentage of the principal amount involved, and payable as a lump sum. In addition, conversions for variable spread loans will include a transaction fee of 0.02% per annum to be added to the interest rate.
3. An additional fee for convertibility risk may apply for local currency conversions. The amount of this fee will be determined on a country-by-country basis.
4. The variable spread over the reference rate may be changed to a fixed spread over the reference rate, but not vice-versa. Such “fixing” of the variable spread will be effected based on the fixed spread applicable to the loan prevailing at the time of the request. Borrowers of loans with a variable spread must fix the spread to obtain a fixed interest rate.
The fixed spread of the converted loan will consist of:

  • The prevailing projected USD funding spread to the reference rate, the market risk premium, and the basis swap adjustment (for loans denominated in EUR and JPY) based on the average remaining maturity of the converted loan
  • The original contractual lending spread of the converted loan
  • The original maturity premium (if applicable) of the converted loan
  • A transaction fee of 0.03 % per annum

Fixed Spreads (1) Applicable to the Conversion of IBRD Flexible Loans
with a Variable Spread as of July 1, 2014

Average Remaining Maturity
Loans Approved On/After Feb. 12, 2008 (2) and with Invitation to Negotiate Issued Before July 23, 2009
Loans with Invitation to Negotiate Issued On/After July 23, 2009 (3) or Approved After Nov. 30, 2009
Loans Approved
After June 30, 2010 and Before July 1, 2014 (4)
Loans Approved
After July 1, 2014 (5)
 
USD
EUR
JPY
USD
EUR
JPY
USD
EUR
JPY
USD
EUR
JPY
Up to 8 years

0.43%

0.38%

0.28%

0.63%

0.58%

0.48%

0.63%

0.58%

0.48%

0.63%

0.58%

0.48%

Greater than 8 to 10 years

0.48%

0.43%

0.33%

0.68%

0.63%

0.53%

0.68%

0.63%

0.53%

0.68%

0.63%

0.53%

Greater than 10 to 12 years

0.48%

0.43%

0.33%

0.68%

0.63%

0.53%

0.68%

0.63%

0.53%

0.68%

0.63%

0.53%

Greater than 12 to 15 years
0.58%
0.53%
0.43%
0.78%
0.73%
0.63%
0.78%
0.73%
0.63%
0.78%
0.73%
0.63%
Greater than 15 to 18 years
0.68%
0.63%
0.53%
0.88%
0.83%
0.73%
0.88%
0.83%
0.73%
0.88%
0.83%
0.73%
Greater than 18 to 20 years
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.88%
0.83%
0.73%

1. A fee of 0.03% per annum applies to conversions, and is included in the fixed spreads shown above.
2. On February 12, 2008 the World Bank introduced the IBRD Flexible Loan.
3. On August 5, 2009, the Bank increased the contractual lending spread from 0.30% to 0.50% affecting all new loans for which the invitation to negotiate issued on or after July 23, 2009, and those for which the invitation to negotiate was issued before July 23, 2009 but which have not been approved by November 30, 2009.
4. On June 22, 2010 the Bank introduced an annual maturity premium for loans with average repayment maturity (ARM) greater than 12 years. For loans with original ARMs greater than 12 and up to 15 years, add 0.10% to the applicable spread shown above; for loans with original ARMs greater than 15 up to 18 years, add 0.20% to the applicable spread above.  This is also applicable to IFLS for which: (i) the Invitation to Negotiate was issued on or before June 30, 2014; and (ii) the Bank's Executive Directors approved the loan on or before September 30, 2014. 5. The following annual maturity premiums are applicable for loans approved by the Bank’s Executive Directors on or after July 1, 2014: for loans with original ARMs greater than 8 and up to 10 years, add 0.10% to the applicable spread shown above; for loans original ARMs greater than 10 and up to 12 years, add 0.20% to the applicable spread shown above; for loans with original ARMs greater than 12 up to 15 years, add 0.30% to the applicable spread above; for loans original ARMs greater than 15 and up to 18 years, add 0.40% to the applicable spread shown above; for loans with original ARMs greater than 18 up to 20 years, add 0.50% to the applicable spread above.  This is not applicable to IFLS for which: (i) the Invitation to Negotiate was issued on or before June 30, 2014; and (ii) the Bank’s Executive Directors approved the loan on or before September 30, 2014.

Transaction Fees for Early Termination: For early termination of a Conversion (a currency, or interest rate conversion, or an interest rate cap/collar), the transaction fee prevailing at time of early termination for the applicable Conversion will apply (e.g., interest rate fixing which had no transaction fee will bear no transaction fee for early termination). Transaction fees expressed as a percentage per annum will be converted to a lump sum.