Conversion Options for IBRD Flexible Loan (IFL)
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 Bank Directive - Conversion of Financial Terms of IBRD and IDA Loans and Financing Instruments 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.
For Fixed and
Variable Spread Loans
|Interest Rate Conversion|
Rate fixings of disbursed amounts
Interest Rate Caps/Collars of disbursed amounts
On a case-by-case basis
Of undisbursed loan amounts (2)
Of disbursed loan amounts
|Changing from variable spread to fixed spread|
Note: For loans for which the Libor/Euribor + Spread is lower than zero during the current interest rate period, transaction fees will be calculated on a case-by-case basis.
(1) Currency of the loan prior to the Conversion.
(2) Expressed as a percentage of the principal amount involved, and payable as a lump sum.
(3) 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. 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
Transaction Fees for Early Termination: For early termination of a Conversion (a currency, or interest rate conversion, or an interest rate cap/collar) a transaction fee of 2bp p.a will apply. Transaction fees expressed as a percentage per annum will be converted to a lump sum.