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World Bank Becomes First Foreign Issuer to Launch in Mexican Pesos

Washington, DC, February 14, 2000—Today the World Bank became the first foreign issuer to launch in Mexican Pesos, thereby opening a new market segment for investors. This transaction, a Mexican Peso (MXN) 1 billion 3-year euronote is also the first bond issue by the World Bank in a Latin American currency. The World Bank's bond issue was lead-managed by Chase Manhattan Ltd. International, New York.

Investor demand for MXN-denominated assets has increased recently on the positive economic and financial news surrounding Mexico, including an expected decline of inflation to less than 10% for 2000. In late January 2000, rating agencies announced that Mexico is being considered for an upgrade to investment grade (BBB) credit. At around that time, the Mexican authorities launched their first 3-year MXN 1 billion Cetes auction. This auction was 4 times oversubscribed and well received by both domestic and offshore (American and European) investors. The government bond has since tightened in yield by more than 100 basis points.

The Bank took advantage of this strong investor interest and the favorable issuance environment to launch its first ever Mexican Peso bond issue. An important objective of the transaction is to assist Mexico in the further development of its capital markets by issuing World Bank debt securities denominated in Mexican Peso, which helps reinforce international investor interest for financial assets issued in the Mexican currency. The World Bank also included two Mexican banks in the syndicate of the transaction, thereby contributing to broadening the exposure of domestic banks to the investment banking business and the international capital markets.

The Bank's MXN 1 billion (equivalent to about USD 106 million) 3-year euronote is due February 28, 2003 and carries a coupon of 15.875%, payable semi-annually. The transaction was priced to yield about 16% (semi-annually) at the reoffer price of 99.783% of par. The notes are listed on the Luxembourg stock exchange.

Chase Manhattan as lead manager for this bond issue took a MXN 900 million (90%) allotment and syndicated the balance to the following five houses: JP Morgan as a senior co-manager with a MXN 50 million allotment (5%); and Banamex, Bancomer, BBVA and ING Barings as co-managers with a MXN 12.5 million allotment each (1.25%).

The transaction was launched into a strengthening Mexican Peso environment. North American investors purchased some 93.3% of the issue. The balance of 6.7% was placed with continental European accounts. The breakdown by investor types was as follows: fund managers accounted for about 69.6% of the issue, retail investors purchased 19.1% of the transaction, insurance companies took about 6.7% and pension funds about 4.6% of the issue. On the day of launch, the transaction closed at 99.95% of par which is 17 cents higher than the original reoffer price.

The World Bank is a market leader in bond issuance in emerging market currencies. It has been recognized by IFR, Euroweek and other publications for its execution in South African Rand, Czech Crown, Philippine Peso and Korean Won over the years. During 1999 alone, the Bank issued bonds in currencies such as Czech Crown, Slovak Crown, Polish Zloty, Greek Drachma, and South African Rand. The Euroweek magazine has recently recognized the Bank's efforts in international bond issuance by awarding the Bank "1999 Deals of the Year" awards in Polish Zloty and Greek Drachma as well as in Australian Dollar.

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