FREE WRITING PROSPECTUS
Filed pursuant to Rule 433
January 26, 2016
Registration No. 333-206207
This free writing prospectus is in respect of Corporación Andina de Fomento (“CAF” or “the issuer”), a multilateral financial institution established under public international law.
The issuer has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site atwww.sec.gov. Alternatively, you can request the prospectus from the issuer or any underwriter or dealer participating in the offering.
The prospectus that is part of CAF’s registration statement is referred to herein as the “debt shelf prospectus”.
Except as otherwise specified, all amounts in this free writing prospectus are expressed in United States dollars (“dollars,” “$,” “U.S.$” or “U.S. dollars”).
FORWARD-LOOKING INFORMATION
This free writing prospectus and the debt shelf prospectus contain forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are identified by words such as “believe”, “expect”, “anticipate”, “should” and words of similar meaning.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual financial and other results may differ materially from the results discussed in the forward-looking statements. Therefore, you should not place undue reliance on them. Factors that might cause such a difference include, but are not limited to, those discussed in this free writing prospectus and the debt shelf prospectus, such as the effects of economic or political turmoil in one or more of our shareholder countries.
CAPITALIZATIONAND INDEBTEDNESS
The following table sets forth our capitalization and indebtedness at September 30, 2015 and does not give effect to any transaction since that date.
At September 30, 2015 | ||||
(in U.S.$ millions) | ||||
Short-term debt(1) | $ | 7,112.4 | ||
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Long-term debt (maturities over one year) | $ | 14,214.6 | ||
Stockholders’ Equity | ||||
Capital | ||||
Subscribed and paid-in capital (authorized capital $15.0 billion)(2) | 4,458.4 | |||
Additional paid-in capital | 2,294.0 | |||
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Total Capital | 6,752.4 | |||
Reserves | ||||
Mandatory reserve | 465.2 | |||
General reserve | 2,136.0 | |||
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Total reserves | 2,601.2 | |||
Other comprehensive income | 0.03 | |||
Retained earnings | 106.1 | |||
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Total shareholders’ equity | 9,459.7 | |||
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Total long-term debt and stockholders’ equity | $ | 23,674.3 | ||
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(1) | Includes deposits, commercial paper, short-term borrowings, the current portion of bonds, accrued interest payable and the current portion of derivative instrument liabilities. |
(2) | In addition to subscribed capital shown in the table, CAF’s subscribed capital included callable capital of $1.6 billion at September 30, 2015. |
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CAPITAL STRUCTURE
General
As of September 30, 2015:
CAF’s authorized capital is $15.0 billion, of which $10.0 billion is paid-in capital and $5.0 billion is callable capital. In March 2015, CAF’s stockholders’ Assembly approved an increase in authorized capital of $5.0 billion from the previous $10.0 billion of total authorized capital.
Our shares are divided into Series “A” shares, Series “B” shares and Series “C” shares.
Series “A” shares may be owned only by the full member shareholder countries (as defined below). Each full member shareholder country owns one Series “A” share, which is held by the government, either directly or through a government-designated social or public purpose institution. Each of the full member shareholder countries owning a Series “A” share is entitled to elect one Director and one Alternate Director to our Board of Directors.
Series “B” shares are currently owned by the full member shareholder countries, and are held by the governments either directly or through designated governmental entities, except for certain Series “B” shares currently constituting approximately 0.1% of our outstanding shares, which are owned by 13 private sector financial institutions in the full member shareholder countries. We offered and sold Series “B” shares to private sector financial institutions in 1989 in order to obtain the benefit of their views in the deliberations of our Board of Directors. As owners of Series “B” shares, the full member shareholder countries collectively are entitled to elect five additional Directors and five Alternate Directors through cumulative voting, and the 13 private sector financial institutions collectively are entitled to elect one Director and one Alternate Director.
Series “C” shares are currently owned by nine associated shareholder countries: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal, Spain and Trinidad and Tobago. We make available Series “C” shares for subscription by countries which are not full member shareholder countries in order to strengthen links between these countries and the full member shareholder countries. Ownership of our Series “C” shares by these countries makes entities in these countries that deal with entities in full member shareholder countries eligible to receive loans from us with respect to such dealings. Holders of Series “C” shares collectively are entitled to elect two Directors and two Alternate Directors.
Under the Constitutive Agreement, Series “A” shares may be held by or transferred only to governments or government-designated social or public purpose institutions. Series “B” shares also may be held by or transferred to such entities and, in addition, may be held by or transferred to private entities or individuals in the full member shareholder countries, except that no more than 49% of the Series “B” shares within any country may be held by private entities or individuals. Series “C” shares may be held by or transferred to public or private entities or individuals outside the full member shareholder countries. Unless a shareholder country withdraws, Series “A” and Series “B” shares may only be transferred within such country.
An amendment to the Constitutive Agreement became effective on July 9, 2008, which (i) allows, under certain circumstances, Latin American and Caribbean countries, including those that are currently associated shareholder countries, to own Series “A” shares and become full member shareholder countries, and (ii) expands CAF’s formal purpose to include supporting sustainable development and economic integration within all of Latin America and the Caribbean, as opposed to within only the Andean region. Consequently, on March 17, 2009, CAF’s Extraordinary Shareholders’ Meeting approved the terms and conditions precedent by which Argentina, Brazil, Panama, Paraguay and Uruguay could become contracting parties to the Constitutive Agreement, could become full member shareholder countries and may own Series “A” shares. In general, in order to become a full member country of CAF, a country must (i) subscribe, directly or indirectly, for one
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Series “A” share, (ii) exchange all of its ordinary and callable Series “C” capital shares for Series “B” share equivalents, (iii) meet any conditions for its accession as determined by the Shareholders’ General Meeting, and (iv) deposit its instrument of adhesion with the Ministry of Foreign Affairs of the Bolivarian Republic of Venezuela. The country is deemed to have become a full member country of CAF 30 days after the Shareholders’ General Meeting determines that the conditions for its adhesion have been complied with, including the depositing of the instrument of adhesion. As of the date of this free writing prospectus, Argentina, Brazil, Panama, Paraguay and Uruguay have ceased to be Series “C” shareholder countries, have adhered to the Constitutive Agreement and now possess Series “A” shares as full member shareholder countries.
Note: All figures as of September 30, 2015, which reference “full member shareholder countries” only include the Plurinational State of Bolivia, the Republics of Argentina, Colombia, Ecuador, Panama, Paraguay and Peru, the Federative Republic of Brazil, the Oriental Republic of Uruguay and the Bolivarian Republic of Venezuela. All figures as of September 30, 2015, which reference “associated shareholder countries” encompass all other shareholder countries. References to “shareholder countries” includes both the full member shareholder countries and the associated shareholder countries.
Paid-in Capital and Un-paid Capital
At September 30, 2015, CAF’s subscribed paid-in and un-paid capital was $5.0 billion, of which $4.5 billion was paid-in capital and $0.5 billion was un-paid capital, which is receivable in installments according to the agreements subscribed with the shareholder countries. Over the years, we have had several increases of subscribed capital.
Since 1990, capital contributions made to CAF (valor patrimonial) comprise a premium paid on each share purchased and the nominal $5,000 per share value established by CAF’s by-laws. The premium component ofvalor patrimonial is determined at the beginning of each subscription and applies to all payments under that subscription.
A list of all capital contributions made by shareholder countries during the last five years (as of September 30, 2015) follows:
Argentina
In 2009, Argentina subscribed to an additional $190.0 million in Series “C” shares, to be paid in seven installments, of which it paid $10.0 million in 2011, $15.0 million in 2012, $25.0 million in 2013, $30.0 million in 2014 and $35.0 million in 2015.
In 2010, Argentina subscribed to $126.0 million in callable capital.
In February 2011, upon completion of all requirements to become a full member shareholder country, Argentina acquired a $1.2 million Series “A” share and exchanged all of its Series “C” ordinary and callable capital shares for Series “B” share equivalents The remaining subscribed Series “C” shares were also exchanged into subscribed Series “B” shares maintaining the original payment schedule. In March 2012, Argentina subscribed to an additional $228.6 million in Series “B” shares, to be paid in four installments, of which it paid $57.1 million in 2013, $57.1 million in 2014 and $57.1 million in 2015.
Barbados
In September 2014, Barbados entered into an agreement to subscribe to Series “C” shares for a total capital contribution of $50.0 million, of which it paid $25.0 million in February 2015.
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Bolivia
In 2009, Bolivia subscribed to an additional $105.0 million in Series “B” shares, to be paid in eight installments, of which it paid $5.0 million in 2010, $5.0 million in 2011, $10.0 million in 2012, $15.0 million in 2013, $15.0 million in 2014 and $15.0 million in 2015.
In January 2012, Bolivia subscribed to an additional $91.5 million in Series “B” shares, to be paid in four installments, of which it paid $22.9 million in 2013, $22.9 million in 2014 and $22.9 million in 2015.
Brazil
In 2009, Brazil subscribed to an additional $190.0 million in Series “C” shares to be paid in seven installments, of which it paid $25.1 million in 2013, $25.0 million in 2014 and $30.0 million in 2015.
In 2009, Brazil subscribed to $126.0 million in callable capital.
In 2010, upon completion of all requirements to become a full member shareholder country, Brazil acquired a $1.2 million Series “A” share and exchanged all of its Series “C” ordinary and callable capital shares for Series “B” share equivalents. The remaining subscribed Series “C” shares were also exchanged into subscribed Series “B” shares maintaining the original payment schedule.
In September 2012, Brazil subscribed to an additional $228.6 million in Series “B” shares, to be paid in four installments, of which it paid $57.1 million in 2014 and $16.4 million in 2015.
As of the date of this free writing prospectus, Brazil has a pending balance of $35 million corresponding to the 2009 subscription agreement, and of $85.1 million of the 2012 subscription agreement.
Colombia
In 2009, Colombia subscribed to an additional $20.0 million in Series “B” shares, which was paid in full in 2010.
In 2010, Colombia subscribed to an additional $150.0 million in Series “B” shares to be paid in five installments, of which it paid $2.0 million in 2010, $18.0 million in 2011, $30.0 million in 2012, $50.0 million in 2013 and $50.0 million in 2014.
In June 2012, Colombia subscribed to an additional $210.0 million in Series “B” shares to be paid in three installments beginning in 2015.
In August 2012, Colombia subscribed to an additional $228.6 million in Series “B” shares, to be paid in four installments, of which it paid $57.1 million in 2013, $57.1 million in 2014 and $51.2 million in 2015.
As of the date of this free writing prospectus, Colombia has a pending balance of $30 million corresponding to the June 2012 subscription agreement.
Ecuador
In 2009, Ecuador subscribed to an additional $105.0 million in Series “B” shares to be paid in eight installments, of which it paid $5.0 million in 2010, $5.0 million in 2011, $10.0 million in 2012, $15.0 million in 2013, $15.0 million in 2014 and $15.0 million in 2015.
In March 2012, Ecuador subscribed to an additional $91.5 million in Series “B” shares, to be paid in four annual installments, of which it paid $22.9 million in 2013, $22.9 million in 2014 and $22.9 million in 2015.
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Mexico
In June 2012, Mexico entered into an agreement to subscribe to an additional $100.0 million in Series “C” shares of CAF, which it paid for in full that same month.
Panama
In 2009, Panama subscribed to an additional $55.0 million in Series “C” shares to be paid in seven installments, of which it paid $3.0 million in 2011, $5.0 million in 2012, $7.0 million in 2013, $10.0 million in 2014 and $10.0 million in 2015.
In 2010, Panama subscribed to $36.0 million in callable capital.
In 2010, upon completion of all requirements to become a full member shareholder country, Panama acquired a $1.2 million Series “A” share and exchanged all of its Series “C” ordinary and callable capital shares for Series “B” share equivalents. The remaining subscribed Series “C” shares were also exchanged into subscribed Series “B” shares maintaining the original payment schedule.
In February 2012, Panama subscribed to an additional $91.5 million in Series “B” shares, to be paid in five installments, of which it paid $3.2 million in 2013, $3.2 million in 2014 and $25.0 million in 2015.
Paraguay
In 2009, Paraguay subscribed to an additional $55.0 million in Series “C” shares to be paid in seven installments, of which it paid $3.0 million in 2011, $5.0 million in 2012, $7.0 million in 2013, $10.0 million in 2014 and $10.0 million in 2015.
In December 2011, upon completion of all requirements to become a full member shareholder country, Paraguay acquired a $1.2 million Series “A” share and exchanged all of its Series “C” ordinary and callable capital shares for Series “B” share equivalents. The remaining subscribed Series “C” shares were also exchanged into subscribed Series “B” shares maintaining the original payment schedule.
In May 2012, Paraguay subscribed to an additional $91.5 million in Series “B” shares, to be paid in five annual installments, of which it paid $3.0 million in 2013, $5.0 million in 2014 and $30.0 million in 2015.
Peru
In 2009, Peru subscribed to an additional $380.0 million in Series “B” shares to be paid in eight installments, although this schedule was later modified to seven installments. As of the date of this free writing prospectus, Peru has paid $310.5 million, with the balance to be paid in two annual installments ending in 2016.
In March 2012, Peru subscribed to an additional $228.6 million in Series “B” shares, to be paid in four annual installments, of which it paid $57.1 million in 2013, $57.1 million in 2014 and $57.1 million in 2015.
Portugal
In 2009, Portugal subscribed to EUR 15.0 million in Series “C” shares to be paid in four equal installments and EUR 60.0 million in callable capital. As of the date of this free writing prospectus, Portugal has paid the total balance of the subscribed paid-in capital.
Spain
In 2010, Spain subscribed to an additional $327.0 million of paid-in capital to be paid in five installments ending in 2014. All five payments have been received.
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Trinidad and Tobago
In 2009, Trinidad and Tobago entered into an agreement to subscribe to Series “C” shares for a total capital contribution of $6.0 million. As of the date of this free writing prospectus, Trinidad and Tobago has paid the total balance of the subscribed paid-in capital.
In April 2012, Trinidad and Tobago entered into an agreement to subscribe to an additional $323.4 million in Series “C” shares of CAF, to be paid in three annual installments, which it paid in full in 2014. Additionally, Trinidad and Tobago has formally expressed its intention to become a contracting party to the Constitutive Agreement. Subject to the satisfaction of certain conditions precedent for full member status specified in “— General” above and the additional condition that Trinidad and Tobago shall have paid for at least half of the capital for which it has subscribed, the subscription agreement contemplates the issuance of one Series “A” share to Trinidad and Tobago, as well as the exchange of Series “C” shares for Series “B” shares.
Uruguay
In 2009, Uruguay subscribed to an additional $55.0 million in Series “C” shares to be paid in seven annual installments ending in 2017, of which it paid $3.0 million in 2011, $5.0 million in 2012, $7.0 million in 2013, $10.0 million in 2014 and $10.0 million in 2015.
In 2009, Uruguay subscribed to $36.0 million in callable capital.
In 2010, upon completion of all requirements to become a full member shareholder country, Uruguay acquired a $1.2 million Series “A” share and exchanged all of its Series “C” ordinary and callable capital shares for Series “B” share equivalents. The remaining subscribed Series “C” shares were also exchanged into subscribed Series “B” shares maintaining the original payment schedule.
In February 2012, Uruguay subscribed to an additional $91.5 million in Series “B” shares, to be paid in four installments, of which it paid $22.9 million in 2013, $22.9 million in 2014 and $22.9 million in 2015.
Venezuela
In 2009, Venezuela subscribed to an additional $380.0 million in Series “B” shares to be paid in eight installments, of which it has paid $200.6 million as of the date of this free writing prospectus.
In August 2012, Venezuela subscribed to an additional $228.6 million in Series “B” shares, to be paid in four installments, of which it paid $57.1 million in 2013, $57.2 million in 2014 and $29.1 million in 2015.
As of the date of this free writing prospectus, all shareholder countries were current in their capital payments, with the exception of Brazil and Colombia.
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The following table sets out the nominal value of our subscribed paid-in capital and un-paid capital as of September 30, 2015:
Shareholders | Paid-in Capital | Un-paid Capital | ||||||
(in U.S.$ thousands) | ||||||||
Series “A” Shares: | ||||||||
Argentina | $ | 1,200 | $ | — | ||||
Bolivia | 1,200 | — | ||||||
Brazil | 1,200 | — | ||||||
Colombia | 1,200 | — | ||||||
Ecuador | 1,200 | — | ||||||
Panama | 1,200 | — | ||||||
Paraguay | 1,200 | — | ||||||
Peru | 1,200 | — | ||||||
Uruguay | 1,200 | — | ||||||
Venezuela | 1,200 | — | ||||||
Series “B” Shares: | ||||||||
Argentina | 409,670 | 46,525 | ||||||
Bolivia | 234,925 | 22,140 | ||||||
Brazil | 345,970 | 93,320 | ||||||
Colombia | 784,400 | 96,180 | ||||||
Ecuador | 236,530 | 22,140 | ||||||
Panama | 106,055 | 28,175 | ||||||
Paraguay | 105,960 | 25,870 | ||||||
Peru | 837,100 | 45,650 | ||||||
Uruguay | 125,300 | 15,095 | ||||||
Venezuela | 789,595 | 93,150 | ||||||
Private sector financial institutions | 2,060 | 20 | ||||||
Series “C” Shares: | ||||||||
Barbados | 8,805 | 8,805 | ||||||
Chile | 27,705 | — | ||||||
Costa Rica | 16,455 | — | ||||||
Dominican Republic | 32,835 | 2,340 | ||||||
Jamaica | 910 | — | ||||||
Mexico | 58,785 | — | ||||||
Portugal | 7,350 | — | ||||||
Spain | 198,695 | — | ||||||
Trinidad and Tobago | 117,285 | — | ||||||
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Total | $ | 4,458,390 | $ | 499,410 |
Reserves
Article 42 of the Constitutive Agreement requires that at least 10% of our net income in each year be allocated to a mandatory reserve until that reserve amounts to 50% of subscribed capital. The mandatory reserve can be used only to offset losses. We also maintain a general reserve to cover contingent events and as a source of funding of last resort in the event of temporary illiquidity or when funding in the international markets is not available or is impractical. The general reserve is invested in short-term securities and certificates of deposit that are easily convertible into cash. The mandatory reserve is an accounting reserve.
At September 30, 2015, our reserves totaled $2.6 billion. At such date, the mandatory reserve amounted to $465.2 million, or 9.4% of subscribed paid-in and un-paid capital, and the general reserve amounted to $2.1 billion.
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Callable Capital
In addition to our subscribed paid-in and un-paid capital, our shareholders have subscribed to callable capital totaling $1.6 billion at September 30, 2015. Our callable capital may be called by the Board of Directors to meet our obligations only to the extent that we are unable to meet such obligations with our own resources. For further information regarding subscribed callable capital, see Note 16 (“Stockholders’ Equity”) to our audited financial statements in the debt shelf prospectus.
The Constitutive Agreement provides that the obligation of shareholders to pay for the shares of callable capital, upon demand by the Board of Directors, continues until such callable capital is paid in full. Thus, we consider the obligations of shareholder countries to pay for their respective callable capital subscriptions to be binding obligations backed by the full faith and credit of the respective governments. If the callable capital were to be called, the Constitutive Agreement requires that the call be prorated among shareholders in proportion to their shareholdings.
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SELECTED FINANCIAL INFORMATION
The following selected financial information as of and for the years ended December 31, 2014, 2013 and 2012 has been derived from our audited financial statements for those periods, which were audited by our independent auditors Lara Marambio & Asociados, a member firm of Deloitte Touche Tohmatsu Limited. The audit report of Lara Marambio & Asociados, a member firm of Deloitte Touche Tohmatsu Limited, has been included on page F-5 of the debt shelf prospectus. Our financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The following selected financial information as of and for the nine-month periods ended September 30, 2015 and 2014 has been derived from our unaudited condensed interim financial information and includes all adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position at such dates and our results of operations for such periods. The results of the nine-month period ended September 30, 2015 are not necessarily indicative of results to be expected for the full year 2015. The selected financial information should be read in conjunction with our audited financial statements and notes thereto, our unaudited condensed interim financial information and the notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this free writing prospectus.
Year Ended December 31 | Nine Months Ended September 30 | |||||||||||||||||||
2014 | 2013 | 2012* | 2015 | 2014 | ||||||||||||||||
(in U.S.$ thousands, except ratios) | ||||||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Interest income | $ | 569,660 | $ | 508,247 | $ | 520,139 | $ | 462,601 | $ | 420,774 | ||||||||||
Interest expense | (310,224 | ) | (297,293 | ) | (281,688 | ) | (250,040 | ) | (228,012 | ) | ||||||||||
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Net interest income | 259,436 | 210,954 | 238,451 | 212,561 | 192,762 | |||||||||||||||
Provision (credit) for loan losses | 21,552 | (83,417 | ) | (4,865 | ) | 17,153 | 10,879 | |||||||||||||
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Net interest income after provision (credit) for loan losses | 237,884 | 294,371 | 243,316 | 195,408 | 181,883 | |||||||||||||||
Non-interest income | 22,961 | 15,903 | 9,281 | 10,794 | 17,996 | |||||||||||||||
Non-interest expenses | (124,681 | ) | (105,646 | ) | (91,851 | ) | (94,850 | ) | (89,922 | ) | ||||||||||
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Net income before unrealized changes in fair value related to financial instruments | 136,164 | 204,628 | 160,746 | 111,352 | 109,957 | |||||||||||||||
Unrealized changes in fair value related to financial instruments | 1,475 | 2,129 | (577 | ) | (5,253 | ) | 651 | |||||||||||||
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Net income | $ | 137,639 | $ | 206,757 | $ | 160,169 | $ | 106,099 | $ | 110,608 | ||||||||||
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Balance Sheet Data (end of period) | ||||||||||||||||||||
Total assets | 30,494,640 | 27,418,320 | 24,818,335 | 31,464,204 | 31,128,150 | |||||||||||||||
Total liabilities | 21,731,404 | 19,601,771 | 17,953,273 | 22,004,432 | 22,602,329 | |||||||||||||||
Total stockholders’ equity | 8,763,236 | 7,816,549 | 6,865,062 | 9,459,772 | 8,525,821 | |||||||||||||||
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Total liabilities and stockholders’ equity | $ | 30,494,640 | $ | 27,418,320 | $ | 24,818,335 | $ | 31,464,204 | $ | 31,128,150 | ||||||||||
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Loan Portfolio and Equity Investments | ||||||||||||||||||||
Loans before allowance for loan losses | $ | 19,144,087 | $ | 18,003,271 | $ | 16,355,410 | $ | 19,271,627 | $ | 18,601,396 | ||||||||||
Allowance for loan losses | 55,763 | 38,336 | 125,799 | 57,217 | 49,215 | |||||||||||||||
Equity investments | 292,345 | 228,385 | 146,811 | 324,483 | 269,403 |
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Year Ended December 31 | Nine Months Ended September 30 | |||||||||||||||||||
2014 | 2013 | 2012* | 2015 | 2014 | ||||||||||||||||
(in U.S.$ thousands, except ratios) | ||||||||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||
Return on average total stockholders’ equity(1) | 1.7 | % | 2.9 | % | 2.5 | % | 1.6 | % | 1.8 | % | ||||||||||
Return on average paid-in capital(2) | 3.4 | % | 5.5 | % | 5.0 | % | 3.2 | % | 3.6 | % | ||||||||||
Return on average assets(3) | 0.5 | % | 0.8 | % | 0.7 | % | 0.5 | % | 0.5 | % | ||||||||||
Administrative expenses divided by average total assets** | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | ||||||||||
Overdue loan principal as a percentage of loan portfolio (excluding non-accrual loans) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||
Non-accrual loans as a percentage of loan portfolio | 0.1 | % | 0.0 | % | 0.05 | % | 0.0 | % | 0.0 | % | ||||||||||
Allowance for loan losses as a percentage of loan portfolio | 0.3 | % | 0.2 | % | 0.8 | % | 0.3 | % | 0.3 | % |
(1) | Net income divided by annual average total stockholders’ equity.** |
(2) | Net income divided by annual average subscribed and paid-in capital.** |
(3) | Net income divided by annual average total assets.** |
* | Certain amounts in the 2012 financial statements have been reclassified to conform to the current year’s presentation. |
** | For the nine-month periods, the amounts have been annualized. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial statements and notes thereto beginning on page F-7 of the debt shelf prospectus and with our unaudited interim financial information as of September 30, 2015 and December 31, 2014, and for the nine-month periods ended September 30, 2015 and 2014 and the notes thereto included in this free writing prospectus.
Summary of Results
Our net income for the year ended December 31, 2014 was $137.6 million, representing a decrease of $69.1 million, or 33.4%, compared to net income of $206.8 million for 2013. This decrease is mainly due to the change in the methodology for calculating the allowance for loan losses in 2013, which resulted in an increase of earnings in this year because of a one-time credit to the provision for loan losses. If this adjustment to the methodology for calculating allowance for loan losses were not considered, the net income for 2014 would have increased 12.9% from net income for 2013. For the year ended December 31, 2013, our net income was $206.8 million, representing an increase of $46.6 million, or 29.1%, over net income of $160.2 million for 2012. This increase resulted primarily from a one-time credit to the provision for loan losses and growth in our loan portfolio.
Our net income for the nine-month period ended September 30, 2015 was $106.1 million, representing a decrease of $4.5 million, or 4.1%, compared to net income of $110.6 million for the corresponding period in 2014. This decrease is mainly due to higher net interest income, offset by higher non-interest expense and a higher loan loss provision. For the nine-month period ended September 30, 2015, our net interest income was $212.6 million, representing an increase of $19.8 million, or 10.3%, compared to net interest income of $192.8 million for the corresponding period in 2014, with the change principally owing to an increase in the loan and liquidity portfolios and a lower cost of funding.
Market and Portfolio Trends
The reported annualized percentage change in real GDP for 2014 for each of the full member shareholder countries at December 31, 2014 was as follows: Argentina, 0.0%; Bolivia, 5.4%; Brazil, 0.1%; Colombia, 4.6%; Ecuador, 3.8%; Panama, 6.2%; Paraguay, 4.4%; Peru, 2.4%; Uruguay, 3.4%; and Venezuela, (3.6%). Due to lower GDP growth rates and the current economic slowdown of some countries in the region, there could be an increase in our loan-loss provisions in the future.
The financial crisis and global economic recession affected our business but did not have a material adverse effect on our results of operations or financial position. Based on our investment strategy and given our investment guidelines, our liquid investment portfolio is of short duration and has no material exposure to structured products such as mortgage-backed or asset-backed securities. Moreover, certain recent developments, such as China’s slowing growth, fluctuations in commodity prices, low growth concerns in Latin America and deflationary pressures in Europe have not thus far impacted our operations. As of September 30, 2015 our loan portfolio was distributed by country as follows: Ecuador —15.65%, Venezuela — 15.19%, Argentina — 14.70%, Peru — 11.24%, Brazil — 10.73%, Bolivia — 10.20%, Colombia — 8.79%, Panama — 5.99%, Uruguay — 2.96%, Paraguay — 1.39%, Dominican Republic — 1.13%, Spain — 0.94%, Costa Rica — 0.64%, Mexico — 0.42% and Jamaica — 0.03%. As of September 30, 2015, we had outstanding loans in Spain of $180.3 million in our loan portfolio, 34.7% of our liquidity portfolio consisted of securities of issuers in European Union countries, including France — 14.3%, United Kingdom — 4.5%, Germany — 3.4, Spain — 2.3%, Netherlands — 2.9%, Italy — 2.5%, Belgium — 1.7%, Ireland — 1.5%, Luxemburg — 0.8%, Denmark — 0.5%, Sweden — 0.3% and Austria — 0.02%.
The volatility of credit spreads during the past three years has varied our borrowing costs resulting in an increase in 2013 and a decrease in 2014. This effect was partially offset by changing the interest rates we charge
12
to borrowers after swaps. The LIBOR rate, which is the basis for the interest payable on both our external debt and on the loans in our loan portfolio, decreased in both 2013 and 2014. The effect of the change in borrowing cost resulted in a decrease of the net interest margin in 2013 and a higher net interest margin for our business in 2014.
Both 2014 and 2013 were characterized by growth in our loan portfolio as a result of our strategy to expand our shareholder base, principally through additional paid-in capital contributions by several of our existing shareholder countries, as well as the issuance of shares to new shareholder countries. Additionally, the global financial crisis has also increased demand for loans from borrowers in our shareholder countries. These two main drivers led to loan portfolio growth of 6.3% in 2014 and 10.1% in 2013. We do not expect that our loan portfolio will be materially affected by the activities of other development banks in the region, since the financing needs of our shareholder countries exceed the current supply of lending resources. We believe that activities of other development banks are complementary to our lending operations.
The decline in global commodity prices, in particular the price of oil, which declined by approximately 70% from September 2014 to the date of this free writing prospectus, has had an impact on some of our shareholder countries. Some countries that are net oil importers have benefited from this price decline, while countries that are net oil exporters have been adversely affected to varying degrees, in some cases significantly, generally corresponding with the importance of the oil and gas sector to the overall economy of the country. Continued low oil prices may result in a downward adjustment of the external risk rating of some of our sovereign borrowers, which may result in an increase in our allowance for loan losses, according to our methodology for determining the allowance for loan losses as explained in “ — Income Statement — Provision (Credit) for Loan Losses” below.
Critical Accounting Policies
General
Our financial statements are prepared in accordance with U.S. GAAP, which requires us in some cases to use estimates and assumptions that may affect our reported results and disclosures. We describe our significant accounting policies in Note 2 (“Basis of Presentation and Significant Accounting Policies”) to our audited financial statements in the debt shelf prospectus. We believe that some of the more significant accounting policies we use to present our financial results involve the use of accounting estimates that we consider to be critical because: (1) they require significant management judgment and assumptions about matters that are complex and inherently uncertain; and (2) the use of a different estimate or a change in estimate could have a material impact on our reported results of operations or financial condition.
Specifically, the estimates we use to determine the allowance for loan losses are critical accounting estimates.
Additionally, the fair values for some financial assets and liabilities recorded in our financial statements are determined according to the procedures established by the accounting pronouncement ASC 820. As of the date of this free writing prospectus, we have not changed or reclassified any transaction from one level to another pursuant to the hierarchy reflected in ASC 820, thereby maintaining consistency in the application of accounting principles in this matter.
Income Statement
Interest Income
Nine Months Ended September 30, 2015 and 2014. For the nine-month period ended September 30, 2015, our interest income was $462.6 million, representing an increase of $41.8 million, or 9.9%, compared to interest income of $420.8 million for the corresponding period in 2014. This increase resulted principally from an increase in the interest income generated by our loan and investment portfolios. For the nine-month period ended September 30 2015, the six-month LIBOR rate averaged 0.51% per annum compared with 0.33% per annum in the same period in 2014, an increase of 54.5%.
13
2014, 2013 and 2012. For the year ended December 31, 2014, our interest income was $569.7 million, representing an increase of $61.4 million, or 12.1%, compared to interest income of $508.2 million for the year ended December 31, 2013. This increase resulted primarily from higher yielding liquid assets compared to the corresponding period in 2013. Average market interest rates were lower in 2014 than 2013, when six-month LIBOR averaged 0.33% per annum compared with 0.41% per annum in 2013, representing a decrease of 19.5% in average six-month LIBOR. Interest income for the year ended December 31, 2013 was $508.2 million, representing a decrease of $11.9 million, or 2.29%, compared to interest income of $520.1 million for the year ended December 31, 2012. Such decrease resulted principally from a decrease in market interest rates.
Interest Expense
Nine Months Ended September 30, 2015 and 2014. For the nine-month period ended September 30, 2015, our interest expense was $250.0 million, representing an increase of $22.0 million, or 9.7%, compared to interest expense of $228.0 million for the corresponding period in 2014. This increase resulted principally from an increase in long-term liabilities in order to match our growth in assets.
2014, 2013 and 2012. For the year ended December 31, 2014, our interest expense was $310.2 million, representing an increase of $12.9 million, or 4.3%, from our interest expense of $297.3 million for the year ended December 31, 2013. This increase resulted primarily from an increase in liabilities to fulfill higher funding requirements related to the growth in the average levels of our loan portfolio compared with 2013, as well as an increase in the funding costs associated with an increase in the average term of our financial liabilities. The average amount of our liabilities increased by 10.1% for the year ended December 31, 2014, compared with the average for the year ended December 31, 2013. Interest expense for the year ended December 31, 2013 was $297.3 million, representing an increase of $15.6 million, or 5.5%, from our interest expense of $281.7 million for the year ended December 31, 2012. This increase is attributable to an increase in liabilities to fulfill higher funding requirements caused by the growth in our loan portfolio and our liquidity portfolio. The average amount of our liabilities as for the year ended December 31, 2013 rose by 12.6% compared with the average level for the year ended December 31, 2012.
Net Interest Income
Nine Months Ended September 30, 2015 and 2014.For the nine-month period ended September 30, 2015, our net interest income was $212.6 million, representing an increase of $19.8 million, or 10.3%, compared to net interest income of $192.8 million for the corresponding period in 2014. The net interest income margin was 0.95% for the nine-month period ended September 30, 2015, which was unchanged from the margin for the corresponding period in 2014.
2014, 2013 and 2012. For the year ended December 31, 2014, our net interest income was $259.4 million, representing an increase of $48.4 million, or 23.0%, over net interest income of $211.0 million for the year ended December 31, 2013. This increase resulted from higher yielding liquid assets, an increase in the loan portfolio and a significant reduction in net borrowing spread on new issuances of debt securities, despite a decrease in the LIBOR rate during the period. Our net interest income for the year ended December 31, 2013 was $211.0 million, representing a decrease of $27.5 million, or 11.5%, from net interest income of $238.5 million for the year ended December 31, 2012. This decrease resulted principally from a combination of a decrease in market interest rates and increase in liabilities to fulfill higher funding requirements. Our net interest income margin was 0.95%, in 2014, compared to 0.88% in 2013 and 1.1% in 2012.
Provision (Credit) for Loan Losses
Effective as of September 2013, we implemented an improvement in the determination of the loan loss provision which resulted in a loan loss provision reversal of $8.7 million in the third quarter of 2013. This determination methodology, which we believe is in line with that of many other supranationals, incorporates recovery rates that differ between sovereign and non-sovereign guaranteed loans.
14
The credit and provision in the periods described below reflect management’s estimates for both general and specific provisions. The allowance for loan losses is estimated considering the credit risk exposure, probability of default and, beginning December 31, 2013, loss given default, based on external data provided by risk rating agencies, recognizing such effects in profit or loss for the period. We established a specific allowance for loan losses for impaired loans. A loan is considered as impaired when, based on currently available information and events, there exists the probability that we will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. See Note 2g. to our audited financial statements in the debt shelf prospectus for further information regarding allowance for loan losses calculations.
Nine Months Ended September 30, 2015 and 2014. For the nine-month period ended September 30, 2015, as a result of the growth of the loan portfolio and changes in the ratings of some of the borrowers provided by risk rating agencies, we recorded a provision to allowance for loan losses of $17.2 million, compared with a provision to allowance for loan losses of $10.9 million for the corresponding period in 2014. The allowance for loan losses as a percentage of the loan portfolio was 0.30% at September 30, 2015 and September 30, 2014, respectively.
2014, 2013 and 2012. For the year ended December 31, 2014, we recorded a provision to allowance for loan losses of $21.6 million, representing a decrease of $105.0 million, or 125.8%, compared with our credit to allowance for loan losses of $83.4 million for the corresponding period in 2013. For the year ended December 31, 2013, we recorded a credit to allowance for loan losses of $83.4 million, representing an increase of $78.6 million, or 1,614.6%, compared with our credit to allowance for loan losses of $4.9 million for the corresponding period in 2012. Changes in the provision occurred mainly because of the improvement in determination methodology discussed above.
Non-Interest Income
Our non-interest income consists principally of commissions, dividends and our corresponding share of earnings or losses on equity investments, which are accounted for using the equity method, and other income.
Nine Months Ended September 30, 2015 and 2014. For the nine-month period ended September 30, 2015, our non-interest income was $10.8 million, representing a decrease of $7.2 million, or 40.0%, compared to non-interest income of $18.0 million for the corresponding period in 2014. This decrease was primarily because of a decrease in income from dividends.
2014, 2013 and 2012. For the year ended December 31, 2014, our total non-interest income was $23.0 million, representing an increase of $7.1 million, or 44.4%, from total non-interest income of $15.9 million for the year ended December 31, 2013. This increase resulted principally from an increase in commissions and other income. Our total non-interest income for the year ended December 31, 2013 represented an increase of $6.6 million or 71.4%, as compared to our total non-interest income of $9.3 million for the year ended December 31, 2012. This increase resulted principally from an increase in commissions and other income, which in turn was mostly due to fluctuations in exchange rates.
Non-Interest Expenses
Our non-interest expenses consist principally of administrative expenses, representing 95.9% and 96.3% of total non-interest expenses for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.
Nine Months Ended September 30, 2015 and 2014. For the nine-month period ended September 30, 2015, our non-interest expenses were $94.9 million representing an increase of $4.9 million, or 5.5%, compared to total non-interest expenses of $90.0 million for the corresponding period in 2014. The increase resulted principally from an increase in administrative expenses.
15
For the nine-month period ended September 30, 2015, our administrative expenses were $91.0 million, or 0.4% of our total average assets, representing an increase of $4.4 million, or 5.0%, compared to administrative expenses of $86.7 million for the corresponding period in 2014. The increase resulted principally from the business growth and impact of local currency expenses and inflation in Venezuela, where our principal executive offices are located.
2014, 2013 and 2012. For the year ended December 31, 2014, our total non-interest expenses were $124.7 million, representing an increase of $19.0 million, or 18.0%, over total non-interest expenses of $105.7 million for the year ended December 31, 2013. The total non-interest expenses for the year ended December 31, 2013 represented an increase of $13.8 million, or 15.0%, over total non-interest expenses of $91.9 million for the year ended December 31, 2012.
For the year ended December 31, 2014, administrative expenses were $116.7 million, or 0.4% of our total average assets, representing an increase of $12.7 million over administrative expenses of $104.0 million for the year ended December 31, 2013. The increase resulted principally from the growth in our loan portfolio. For the year ended December 31, 2013, administrative expenses were $104.0 million, or 0.4% of our total average assets, representing an increase of $13.0 million over administrative expenses of $91.0 million for the year ended December 31, 2012. The increase resulted principally from the growth in our loan portfolio. Equity investments, which do not have readily determinable fair values and in which we have a participation of less than 20% of the investee’s equity, are required to be recorded at cost according to U.S. GAAP. Also, management is required to assess the value of these investments at least annually and determine whether any value impairment is temporary or other than temporary. Impairment charges must be taken once management has determined that the loss of value is other than temporary. As a result of the analysis of these equity investments, management determined to take $0.0 in impairment charges on any of our equity investments in each of 2013 and 2012; $7.3 million in 2014 and $2.8 million for the nine-month period ended September 30, 2015.
Balance Sheet
Total Assets and Liabilities
September 30, 2015. At September 30, 2015, our total assets were $31.5 billion, representing an increase of $1.0 billion, or 3.2%, over total assets of $30.5 billion at December 31, 2014. The increase in assets resulted primarily from an increase in our loan portfolio. In September 30, 2015, there was a significant increase in other assets that was mainly due to the selling of assets from the trading portfolio with settlement dates after September 30, 2015 that had to be registered under accounts receivable. At September 30, 2015, our total liabilities were $22.0 billion, representing an increase of $0.3 billion, or 1.3%, over total liabilities of $21.7 billion at December 31, 2014. The increase in liabilities resulted primarily from an increase in funding, mainly through bond issuances, to fund the growth of assets.
2014 and 2013. At December 31, 2014, our total assets were $30.5 billion, representing an increase of $3.1 billion, or 11.2%, over total assets of $27.4 billion at December 31, 2013. The increase in our total assets principally reflected a 22.2% increase in the liquid assets portfolio and a 6.3% increase in the loan portfolio. At December 31, 2014, our total liabilities were $21.7 billion, representing an increase of $2.1 billion, or 10.9%, over total liabilities of $19.6 billion at December 31, 2013. The increase in our total liabilities resulted from higher funding requirements to support a higher level of assets.
Asset Quality
Overdue Loans
September 30, 2015 and December 31, 2014. At September 30, 2015 the total principal amount of outstanding overdue loans was $0.0 million. At December 31, 2014, the total principal amount of outstanding overdue loans was $0.0 (not including non-accrual loans in overdue status).
December 31, 2013. There were $0.0 in overdue loans at December 31, 2013.
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Impaired Loans and Non-Accrual Loans
September 30, 2015 and December 31, 2014. At each of September 30, 2015 and December 31, 2014, the total principal amount of our impaired loans was $0.0 million, or 0.0% of the total loan portfolio. We consider a loan to be impaired when it is in non-accrual status.
December 31, 2013. There were $0.0 million of loans in non-accrual status at December 31, 2013.
Restructured Loans
September 30, 2015 and December 31, 2014. At each of September 30, 2015 and December 31, 2014, the total principal amount of outstanding restructured loans was $0.0 million, or 0.0% of the total loan portfolio.
December 31, 2013. At December 31, 2013, the total principal amount of outstanding restructured loans was $8.3 million, or 0.05% of the total loan portfolio, represented one loan to a private sector borrower in Colombia.
Loan Write-offs and Recoveries
September 30, 2015. There were $16.5 million in loan write-offs during the nine-month period ended September 30, 2015, owing to an impairment of two loans to private sector borrowers in Argentina, and there were $0.0 in loan write-offs in the corresponding period of 2014. We booked recoveries of $0.85 million during the nine-month period ended September 30, 2015 and $0.0 during the corresponding period of 2014.
2014 and 2013. There were $4.1 million of loans written-off in 2014 and $4.1 million of loans written-off in 2013. During 2014 and 2013, we booked recoveries of $0.0 thousand and $78.9 thousand, respectively.
See “Operations of CAF — Asset Quality” in the debt shelf prospectus for further information regarding our asset quality. See “— Balance Sheet” above for details regarding the distribution of our loans by country and “Operations of CAF — Loan Portfolio” in the debt shelf prospectus for details regarding the distribution of our loans by economic sector.
Commitments and Contingencies
We enter into commitments and contingencies in the normal course of our business to facilitate our business and objectives. Commitments and contingencies include (1) credit agreements subscribed and pending disbursement, (2) lines and letters of credit for foreign trade, (3) equity investment agreements subscribed and (4) partial credit guarantees. For further discussion of these arrangements, see Note 23 (“Commitments and Contingencies”) to our audited financial statements in the debt shelf prospectus.
Liquidity
Effective as of September 2014, we updated our liquidity policy, which requires us to maintain sufficient liquid assets to cover at least 12 months of net cash requirements.
Net cash requirements under this new policy are calculated as follows:
(+) | Scheduled loan collections |
(+) | Committed paid-in capital payments |
(-) | Scheduled debt service |
(-) | Committed disbursements |
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Our investment policy requires that at least 90% of our liquid assets be held in the form of investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization. The remaining portion of our liquid assets may be invested in non-investment grade instruments rated B-/Ba3/B or better by a U.S. nationally-recognized statistical rating organization. Our investment policy emphasizes security and liquidity over yield.
September 30, 2015. At September 30, 2015, our liquid assets consisted of $10.0 billion of cash, time deposits and securities, of which 98.3% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally recognized statistical rating organization, compared to $10.1 billion of cash, time deposits and securities, of which 96.7% was invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally recognized statistical rating organization, at December 31, 2014. At September 30, 2015, 29.3% of our liquid assets were invested in time deposits in financial institutions, 24.8% in commercial paper, 15.0% in corporate and financial institution bonds, 17.0 % in certificates of deposit, 3.9% in U.S. Treasury Notes, 1.7% in bonds of non-U.S. governments, government entities, and 8.3% in other instruments, including deposits in cash.
2014 and 2013. At December 31, 2014, our liquid assets consisted of $10.1 billion of cash, time deposits and securities, of which 96.7% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization; 28.3% of our liquid assets were invested in time deposits in financial institutions, 10.6% in commercial paper, 11.7% in corporate and financial institution bonds, 22.3% in certificates of deposit, 18.9% in U.S. Treasury Notes and 8.2% in other instruments including deposits in cash. At December 31, 2013, our liquid assets consisted of $8.3 billion of cash, time deposits and securities, of which 96.4% were invested in investment grade instruments rated A-/A3/A- or better by a U.S. nationally-recognized statistical rating organization, 27.0% of our liquid assets were invested in time deposits in financial institutions, 23.9% in commercial paper, 14.0% in corporate and financial institution bonds, 17.5% in certificates of deposit, 8.1% in U.S. Treasury Notes, 1.6% in bonds of non-U.S. governments and government entities and 7.9% in other instruments, including deposits in cash.
Strategy and Capital Resources
Our business strategy is to provide financing for projects, trade and investment in the shareholder countries. Management expects our assets to grow in the future, which will increase our need for additional funding; likewise, maturing debt obligations will need to be replaced. In addition to scheduled capital increases, management anticipates a need to increase funds raised in the international capital markets and to maintain funding through borrowings from multilateral and other financial institutions. While the substantial majority of our equity will continue to be held by full member shareholder countries, we intend to continue offering equity participation to associated shareholder countries through the issuances of Series “C” shares to such countries. See “Capital Structure” in the debt shelf prospectus.
We intend to continue our programs to foster sustainable growth within the shareholder countries, and to increase our support for the private sector within its markets, either directly or through financial intermediaries. See “Operations of CAF” in the debt shelf prospectus.
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UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION AND NOTES THERETO
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Financial Information
As of September 30, 2015 and December 31, 2014
Balance Sheets
(In thousands of U.S. dollars)
September 30, 2015 | December 31, 2014 | |||||||
ASSETS | ||||||||
Cash and due from banks | 298,573 | 141,147 | ||||||
Deposits with banks | 1,652,436 | 1,279,267 | ||||||
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Cash and deposits with banks | 1,951,009 | 1,420,414 | ||||||
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Marketable securities | ||||||||
Trading | 6,740,436 | 7,130,791 | ||||||
Other investments | 1,268,101 | 1,596,608 | ||||||
Loans (includes $10,706 and $21,954 as of September 30, 2015 and December 31, 2014, respectively, at fair value) | 19,271,627 | 19,144,087 | ||||||
Less loan commissions, net of origination costs | 88,283 | 89,411 | ||||||
Less allowance for loan losses | 57,217 | 55,763 | ||||||
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Loans, net | 19,126,127 | 18,998,913 | ||||||
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Accrued interest and commissions receivable | 328,251 | 292,325 | ||||||
Equity investments | 324,483 | 292,345 | ||||||
Derivative financial instruments | 323,221 | 383,703 | ||||||
Property and equipment, net | 68,629 | 69,003 | ||||||
Other assets | 1,333,947 | 310,538 | ||||||
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TOTAL | 31,464,204 | 30,494,640 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES: | ||||||||
Deposits | 2,276,127 | 3,696,510 | ||||||
Commercial paper | 1,917,597 | 1,853,282 | ||||||
Borrowings (includes $ 547,475 and $432,617 as of September 30, 2015 and December 31, 2014, respectively, at fair value) | 1,502,936 | 1,514,646 | ||||||
Bonds (includes $ 14,386,277 and $13,124,319 as of September 30, 2015 and December 31, 2014, respectively, at fair value) | 15,117,566 | 13,859,940 | ||||||
Accrued interest payable | 248,603 | 239,547 | ||||||
Derivative financial instruments | 677,494 | 383,086 | ||||||
Accrued expenses and other liabilities | 264,109 | 184,393 | ||||||
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Total liabilities | 22,004,432 | 21,731,404 | ||||||
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STOCKHOLDERS’ EQUITY: | ||||||||
Subscribed and paid-in capital (authorized capital $15 billion and $10 billion, respectively) | 4,458,390 | 4,250,495 | ||||||
Additional paid-in capital | 2,294,029 | 1,911,487 | ||||||
Reserves | 2,601,222 | 2,463,583 | ||||||
Other comprehensive income | 32 | 32 | ||||||
Retained earnings | 106,099 | 137,639 | ||||||
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Total stockholders’ equity | 9,459,772 | 8,763,236 | ||||||
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TOTAL | 31,464,204 | 30,494,640 | ||||||
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19
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Financial Information for
the Nine-Month Period ended September 30, 2015 and 2014
Statements of Comprehensive Income
(In thousands of U.S. dollars)
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
Interest income | ||||||||
Investments and deposits with banks | 45,379 | 33,656 | ||||||
Loans | 386,548 | 357,832 | ||||||
Loan commissions | 30,674 | 29,286 | ||||||
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Total interest income | 462,601 | 420,774 | ||||||
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Interest expense | ||||||||
Deposits | 6,768 | 9,001 | ||||||
Commercial papers | 5,977 | 4,850 | ||||||
Borrowings and other obligations | 17,311 | 15,834 | ||||||
Bonds | 211,745 | 184,963 | ||||||
Commissions | 8,239 | 13,364 | ||||||
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Total interest expense | 250,040 | 228,012 | ||||||
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Net interest income | 212,561 | 192,762 | ||||||
Provision for loan losses | 17,153 | 10,879 | ||||||
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Net interest income, after provision for loan losses | 195,408 | 181,883 | ||||||
Non-interest income | ||||||||
Other commissions | 8,383 | 7,499 | ||||||
Dividends and equity in earnings of investees | 1,473 | 6,245 | ||||||
Other income | 938 | 4,252 | ||||||
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Total non-interest income | 10,794 | 17,996 | ||||||
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Non-interest expenses | ||||||||
Administrative expenses | 90,987 | 86,628 | ||||||
Impairment charge for equity investments | 2,793 | 1,147 | ||||||
Other expenses | 3,863 | 3,294 | ||||||
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Total non-interest expenses | 94,850 | 89,922 | ||||||
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Net income before unrealized changes in fair value related to financial instruments | 111,352 | 109,957 | ||||||
Unrealized changes in fair value related to financial instruments | (5,253 | ) | 651 | |||||
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Net income | 106,099 | 110,608 | ||||||
Other comprehensive income | ||||||||
Unrecognized change in assets/ liabilities under benefit pension plan | — | 238 | ||||||
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Total comprehensive income | 106,099 | 110,846 | ||||||
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20
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Financial Information for
the Nine-Month Period ended September 30, 2015 and 2014
Statement of Stockholders’ Equity
(In thousands of U.S. dollars)
Reserves | ||||||||||||||||||||||||||||||||
Subscribed and paid-in capital | Additional paid-in capital | General Reserve | Article No 42 of by-laws | Total Reserves | Other Comprehensive Income | Retained earnings | Total stockholders’ equity | |||||||||||||||||||||||||
Balances at December 31, 2013 | 3,941,380 | 1,342,903 | 1,895,592 | 430,234 | 2,325,826 | (317 | ) | 206,757 | 7,816,549 | |||||||||||||||||||||||
Capital increase | 235,075 | 432,351 | — | — | — | — | — | 667,426 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 110,608 | 110,608 | ||||||||||||||||||||||||
Appropriated for general reserve | — | — | 116,557 | — | 116,557 | — | (116,557 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to article 42 of by-laws | — | — | — | 21,200 | 21,200 | — | (21,200 | ) | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 238 | — | 238 | ||||||||||||||||||||||||
Distribution to stockholders’ special funds | — | — | — | — | — | — | (69,000 | ) | (69,000 | ) | ||||||||||||||||||||||
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Balances at September 30, 2014 | 4,176,455 | 1,775,254 | 2,012,149 | 451,434 | 2,463,583 | (79 | ) | 110,608 | 8,525,821 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves | ||||||||||||||||||||||||||||||||
Subscribed and paid-in capital | Additional paid-in capital | General Reserve | Article No 42 of by-laws | Total Reserves | Other Comprehensive Income | Retained earnings | Total stockholders’ equity | |||||||||||||||||||||||||
Balances at December 31, 2014 | 4,250,495 | 1,911,487 | 2,012,149 | 451,434 | 2,463,583 | 32 | 137,639 | 8,763,236 | ||||||||||||||||||||||||
Capital increase | 207,895 | 382,542 | — | — | — | — | — | 590,437 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 106,099 | 106,099 | ||||||||||||||||||||||||
Appropriated for general reserve | — | — | 123,874 | — | 123,874 | — | (123,874 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to article 42 of by-laws | — | — | — | 13,765 | 13,765 | — | (13,765 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balances at September 30, 2015 | 4,458,390 | 2,294,029 | 2,136,023 | 465,199 | 2,601,222 | 32 | 106,099 | 9,459,772 | ||||||||||||||||||||||||
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21
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Financial Information for
the Nine-Month Period ended September 30, 2015 and 2014
Statements of Cash Flows
(In thousands of U.S. dollars)
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | 106,099 | 110,608 | ||||||
|
|
|
| |||||
Adjustments to reconcile net income to net cash used in operating activities | ||||||||
Unrealized gain on trading securities | 2,474 | 955 | ||||||
Amortization of loan commissions, net of origination costs | (10,013 | ) | (12,957 | ) | ||||
Provision for loan losses | 17,153 | 10,879 | ||||||
Impairment charge for equity investments | 2,793 | — | ||||||
Equity in earnings of investees | 340 | 735 | ||||||
Depreciation of property and equipment | 4,085 | 4,410 | ||||||
Amortization of deferred charges | 2,574 | 2,863 | ||||||
Provision for employees’ severance indemnities and benefits | 7,561 | 6,780 | ||||||
Provisions for employees’ savings plan | 1,009 | 999 | ||||||
Unrealized changes in fair value related to financial instruments | 5,253 | (651 | ) | |||||
Net changes in operating assets and liabilities | ||||||||
Severance indemnities paid or advanced | (5,790 | ) | (5,090 | ) | ||||
Employees’ savings plan paid or advanced | (31 | ) | (1,095 | ) | ||||
Trading securities, net | (444,294 | ) | (1,257,720 | ) | ||||
Interest and commissions receivable | (35,926 | ) | (75,194 | ) | ||||
Other assets | 6,579 | (66,097 | ) | |||||
Accrued interest payable | 9,056 | 45,857 | ||||||
Accrued expenses and other liabilities | 110,666 | 167,410 | ||||||
|
|
|
| |||||
Total adjustments and net changes in operating assets and liabilities | (326,511 | ) | (1,177,916 | ) | ||||
|
|
|
| |||||
Net cash used in operating activities | (220,412 | ) | (1,067,308 | ) | ||||
|
|
|
| |||||
INVESTING ACTIVITIES: | ||||||||
Purchases of other investments | (3,130,387 | ) | (2,639,009 | ) | ||||
Maturities of other investments | 3,458,894 | 1,497,842 | ||||||
Loan origination and principal collections, net | (134,354 | ) | (584,935 | ) | ||||
Equity investments, net | (35,271 | ) | (41,753 | ) | ||||
Purchases of property and equipment | (3,711 | ) | (4,641 | ) | ||||
|
|
|
| |||||
Net cash provided by (used in) investing activities | 155,171 | (1,772,496 | ) | |||||
|
|
|
| |||||
Carried forward, | (132,763 | ) | (2,858,048 | ) |
22
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Condensed Interim Financial Information for
the Nine-Month Period ended September 30, 2015 and 2014
Statements of Cash Flows continued
(In thousands of U.S. dollars)
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
Brought Forward, | (132,763 | ) | (2,858,048 | ) | ||||
|
|
|
| |||||
FINANCING ACTIVITIES: | ||||||||
Net (decrease) increase in deposits | (1,420,383 | ) | 1,132,594 | |||||
Net increase (decrease) in commercial paper | 64,315 | (965,632 | ) | |||||
Net (increase) decrease in derivative related collateral | (167,452 | ) | 44,898 | |||||
Proceeds from issuance of bonds | 2,131,280 | 3,536,104 | ||||||
Repayment of bonds | (515,754 | ) | (650,327 | ) | ||||
Proceeds from borrowings | 155,517 | 38,098 | ||||||
Repayment of borrowings | (174,602 | ) | (279,416 | ) | ||||
Distributions to stockholders’ funds | — | (69,000 | ) | |||||
Proceeds from issuance of shares | 590,437 | 667,426 | ||||||
|
|
|
| |||||
Net cash provided by financing activities | 663,358 | 3,472,989 | ||||||
|
|
|
| |||||
Net increase in cash and deposits with banks | 530,595 | 614,941 | ||||||
Cash and deposits with banks at beginning of period | 1,420,414 | 1,692,259 | ||||||
|
|
|
| |||||
Cash and deposits with banks at end of period | 1,951,009 | 2,307,200 | ||||||
|
|
|
| |||||
Supplemental disclosure | ||||||||
Interest paid during the period | 232,472 | 168,506 | ||||||
|
|
|
| |||||
Non-cash financing activities | ||||||||
Change in derivative instrument assets | (60,482 | ) | (57,343 | ) | ||||
Change in derivative instrument liabilities | 294,408 | 117,267 |
23
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Unaudited Condensed Interim Financial Information
As of September 30, 2015 and December 31, 2014 and for the Nine-Month
Period ended September 30, 2015 and September 30, 2014
(In thousands of U.S. dollars)
(1) Origin
Business description —Corporación Andina de Fomento (CAF) began its operations on June 8, 1970, and was established under public international law which abides by the provisions set forth in its by-laws. Series “A” and “B” stockholder countries are: Argentina, Bolivia, Brazil, Colombia, Ecuador, Panama, Paraguay, Peru, Uruguay and Venezuela. Series “C” stockholder countries are: Barbados, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Portugal, Spain and Trinidad and Tobago. In addition, there are 13 banks which are Series “B” stockholders. CAF is headquartered in Caracas and has offices in Asuncion, Bogota, Brasilia, Buenos Aires, Ciudad de Mexico, Ciudad de Panama, La Paz, Lima, Madrid, Montevideo, Puerto España and Quito.
CAF’s objective is to support sustainable development and economic integration within Latin America and the Caribbean by helping stockholder countries diversify their economies, and become more competitive and responsive to social needs.
CAF offers financial and related services to the governments of its stockholder countries, as well as their public and private institutions, corporations and joint ventures. CAF’s principal activity is to provide short, medium- and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in stockholder countries. Furthermore, CAF manages and supervises third-party cooperation funds of other countries and organizations, destined to finance programs agreed upon with donor organizations which are in line with CAF policies and strategies.
CAF raises funds to finance operations both within and outside its stockholder countries.
(2) Basis of Presentation and Significant Accounting Policies
Financial Statement Presentation —The condensed interim financial information as of September 30, 2015 and for the nine-month period ended September 30, 2015 and 2014 is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such interim financial information includes all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the nine-month period ended September 30, 2015 are not necessarily an indication of the results to be expected for the full year 2015.
The condensed interim financial information was based on the accounting principles of CAF’s audited financial statements for the years ended December 31, 2014, 2013 and 2012. For a detailed discussion about CAF’s significant accounting policies, see Note 2 to the 2014 financial statements. During the nine-month period ended September 30, 2015, there were no significant updates made to CAF’s significant accounting policies.
This condensed interim financial information should be read in conjunction with CAF’s audited financial statements for the years ended December 31, 2014, 2013 and 2012 and the notes thereto.
24
(3) Marketable Securities
Trading Securities
A summary of trading securities follows:
September 30, 2015 | December 31, 2014 | |||||||||||||||
Amount | Average maturity (years) | Amount | Average maturity (years) | |||||||||||||
U.S. Treasury Notes | 383,407 | 2.93 | 1,920,441 | 1.88 | ||||||||||||
|
|
|
| |||||||||||||
Non-U.S. governments and government entities bonds | 166,061 | 0.57 | 195,373 | 0.60 | ||||||||||||
|
|
|
| |||||||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial papers | 2,470,960 | 0.15 | 1,075,478 | 0.32 | ||||||||||||
Certificates of deposit | 1,692,225 | 0.25 | 2,264,749 | 0.46 | ||||||||||||
Bonds | 1,497,888 | 1.81 | 1,183,477 | 1.64 | ||||||||||||
Collateralized mortgage obligation | 321,119 | 4.27 | 292,214 | 5.55 | ||||||||||||
Liquidity funds | 208,776 | 1.00 | 199,059 | 1.00 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
6,190,968 | 0.82 | 5,014,977 | 1.02 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
6,740,436 | 0.94 | 7,130,791 | 1.24 | |||||||||||||
|
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|
|
|
|
|
|
(4) Loans
Loans include short, medium and long-term loans to finance projects, working capital and trade activities. The majority of the loans are to Series “A” and “B” stockholder countries, or to private institutions or companies of these countries.
Loans by country are summarized as follows:
September 30, 2015 | December 31, 2014 | |||||||
Stockholder country: | ||||||||
Argentina | 2,833,356 | 2,718,009 | ||||||
Bolivia | 1,965,073 | 1,909,509 | ||||||
Brazil | 2,067,906 | 1,932,414 | ||||||
Colombia | 1,693,909 | 1,768,619 | ||||||
Costa Rica | 125,900 | 128,627 | ||||||
Dominican Republic | 217,831 | 172,458 | ||||||
Ecuador | 3,016,924 | 2,824,501 | ||||||
Jamaica | 5,225 | 5,628 | ||||||
Mexico | 81,156 | 127,526 | ||||||
Panama | 1,154,026 | 1,254,545 | ||||||
Paraguay | 267,394 | 249,271 | ||||||
Peru | 2,165,268 | 2,333,123 | ||||||
Portugal | — | 15,000 | ||||||
Spain | 180,328 | 191,875 | ||||||
Uruguay | 569,775 | 509,247 | ||||||
Venezuela | 2,927,300 | 3,001,625 | ||||||
|
|
|
| |||||
Loans | 19,271,371 | 19,141,977 | ||||||
Fair value adjustments | 256 | 2,110 | ||||||
|
|
|
| |||||
Carrying value of loans | 19,271,627 | 19,144,087 | ||||||
|
|
|
|
25
Fair value adjustments to the carrying value of loans represent adjustments to the carrying value of loans for which the fair value option is elected.
At September 30, 2015 and December 31, 2014, loans denominated in other currencies were granted for an equivalent of $32,992 and $41,780, respectively, principally in Bolivian bolivianos, Peruvian nuevos soles, Paraguayan guarani, Mexican pesos and Colombian pesos. At September 30, 2015 and December 31, 2014, loans include fixed interest rate loans of $64,461 and $73,164, respectively.
Loans classified by public sector and private sector borrowers, are as follows:
September 30, 2015 | December 31, 2014 | |||||||
Public sector | 15,859,741 | 15,564,049 | ||||||
Private sector | 3,411,630 | 3,577,928 | ||||||
|
|
|
| |||||
19,271,371 | 19,141,977 | |||||||
|
|
|
|
The average yield of the loan portfolio is shown below:
September 30 , 2015 | December 31, 2014 | |||||||||||||||
Amount | Average yield (%) | Amount | Average yield (%) | |||||||||||||
Loans | 19,271,371 | 2.74 | 19,141,977 | 2.62 | ||||||||||||
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|
|
Loans by industry segments are as follows:
September 30, 2015 | December 31, 2014 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Agriculture, hunting and forestry | 75,011 | — | 63,389 | — | ||||||||||||
Manufacturing | 334,165 | 2 | 399,627 | 2 | ||||||||||||
Electricity, gas and water supply | 6,754,798 | 35 | 6,613,662 | 35 | ||||||||||||
Transport, warehousing and communications | 6,959,162 | 36 | 7,091,245 | 37 | ||||||||||||
Commercial banks | 1,532,283 | 8 | 1,191,862 | 6 | ||||||||||||
Development banks | 359,642 | 2 | 571,100 | 3 | ||||||||||||
Social and other infrastructure programs | 3,063,699 | 16 | 3,047,281 | 16 | ||||||||||||
Others | 192,611 | 1 | 163,811 | 1 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
19,271,371 | 100 | 19,141,977 | 100 | |||||||||||||
|
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|
|
|
|
|
|
Loans mature as follows:
September 30, 2015 | December 31, 2014 | |||||||
Remaining maturities: | ||||||||
Less than one year | 1,133,706 | 2,717,459 | ||||||
Between one and two years | 2,711,913 | 2,140,348 | ||||||
Between two and three years | 1,994,560 | 1,919,126 | ||||||
Between three and four years | 1,802,878 | 1,713,659 | ||||||
Between four and five years | 1,910,601 | 1,815,106 | ||||||
Over five years | 9,717,713 | 8,836,279 | ||||||
|
|
|
| |||||
19,271,371 | 19,141,977 | |||||||
|
|
|
|
26
Loan portfolio is classified depending on the credit risk type, as follows:
September 30 2015 | December 31, 2014 | |||||||
Sovereign guaranteed | 15,597,770 | 15,318,111 | ||||||
Non-sovereign guaranteed | 3,673,601 | 3,823,866 | ||||||
|
|
|
| |||||
19,271,371 | 19,141,977 | |||||||
|
|
|
|
Loan portfolio quality
The loan portfolio quality indicators are presented below:
September 30, 2015 | December 31, 2014 | |||||||
During the period/year CAF recorded the following transactions: | ||||||||
Impaired Loans | 0 | 0 | ||||||
Loans written-off | 16,545 | 4,125 | ||||||
Purchases of loan portfolio | 0 | 0 | ||||||
Sales of loan portfolio | 33,038 | 118,008 | ||||||
Trouble debt restructured | 0 | 0 | ||||||
CAF presented the following amounts and quality indicators as of the end of the period/year: | ||||||||
Non-accrual loans | 0 | 16,545 | ||||||
Overdue loans | 0 | 0 | ||||||
Allowance for loan losses as a percentage of loan portfolio | 0.30 | % | 0.29 | % | ||||
Nonaccrual loans as a percentage of loan portfolio | 0.00 | % | 0.09 | % | ||||
Overdue loan principal as a percentage of loan portfolio | 0.00 | % | 0.00 | % |
A/B Loans
CAF administers loan-participations sold, and only assumes the credit risk for the portion of the loan owned by CAF. At September 30, 2015 and December 31, 2014, CAF maintained loans of this nature amounting to $1,261,947 and $1,558,400, respectively, whereby other financial institutions provided funds for $864,259 and $1,067,057, respectively.
Allowance for Loan Losses
Changes in the allowance for loan losses are presented below:
For the nine-month period ended September 30, 2015 | For the nine-month period ended September 30, 2014 | |||||||||||||||||||||||
Sector | Sector | |||||||||||||||||||||||
Sovereign | Non-sovereign | Total | Sovereign | Non-sovereign | Total | |||||||||||||||||||
Balances at beginning of period | 20,241 | 35,522 | 55,763 | 10,898 | 27,438 | 38,336 | ||||||||||||||||||
Provision to results of operations | 5,215 | 11,938 | 17,153 | 7,573 | 3,306 | 10,879 | ||||||||||||||||||
Loans written-off | — | (16,545 | ) | (16,545 | ) | — | — | — | ||||||||||||||||
Recoveries | — | 846 | 846 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balances at end of period | 25,456 | 31,761 | 57,2177 | 18,471 | 30,744 | 49,215 | ||||||||||||||||||
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27
(5) Other Assets
A summary of other assets follows:
September 30, 2015 | December 31, 2014 | |||||||
Intangible assets, net | 13,122 | 10,199 | ||||||
Deferred charges, net | 32,931 | 36,470 | ||||||
Receivable from investment securities sold | 836,726 | 4,551 | ||||||
Derivative related collateral | 434,959 | 233,746 | ||||||
Other assets | 16,209 | 25,572 | ||||||
|
|
|
| |||||
1,333,947 | 310,538 | |||||||
|
|
|
|
(6) Deposits
A summary of deposits follows:
September 30, 2015 | December 31, 2014 | |||||||
Demand deposits | 95,302 | 72,479 | ||||||
Time deposits: | ||||||||
Less than one year | 2,180,825 | 3,624,031 | ||||||
|
|
|
| |||||
2,276,127 | 3,696,510 | |||||||
|
|
|
|
At September 30, 2015 and December 31, 2014, the interest rates on deposits ranged from 0.03% to 1.80% and from 0.06% to 1.81%, respectively. Deposits are issued for amounts equal to or more than $100. Total deposits in other currencies amounted to $1,055 and $157,324, at September 30, 2015 and December 31, 2014, respectively.
(7) Commercial Papers
The outstanding amount of commercial papers issued by CAF amounting of $1,917,597 as of September 30, 2015 and 55% of CAF’s commercial paper will mature in 2015. At December 31, 2014, $1,853,282 of CAF’s commercial paper matures in the year 2015. At September 30, 2015 and December 31, 2014, the interest rates on commercial paper ranged from 0.20% to 0.72% and from 0.15% to 0.46%, respectively.
(8) Borrowings
A summary of borrowings follows:
September 30, 2015 | December 31, 2014 | |||||||
U.S. dollars | 1,312,882 | 1,443,140 | ||||||
Euros | 112,900 | — | ||||||
Peruvian nuevos soles | 21,098 | 22,044 | ||||||
Venezuelan bolivars | 30,159 | 30,159 | ||||||
Other currencies | 5,072 | 5,853 | ||||||
|
|
|
| |||||
1,482,111 | 1,501,196 | |||||||
Fair value adjustments | 20,825 | 13,450 | ||||||
|
|
|
| |||||
Carrying value of borrowings | 1,502,936 | 1,514,646 | ||||||
|
|
|
|
28
At September 30, 2015 and December 31, 2014, there were fixed interest-bearing borrowings in the amount of $525,354 and $545,171, respectively. At September 30, 2015 and December 31, 2014, the interest rates on borrowing ranged from 0.22% to 12.00% and from 0.13% to 12.00%, respectively.
Borrowings, by remaining maturities, are summarized below:
September 30, 2015 | December 31, 2014 | |||||||
Remaining maturities: | ||||||||
Less than one year | 271,803 | 246,009 | ||||||
Between one and two years | 335,942 | 441,506 | ||||||
Between two and three years | 129,195 | 105,614 | ||||||
Between three and four years | 162,844 | 184,241 | ||||||
Between four and five years | 129,218 | 113,625 | ||||||
Over five years | 453,109 | 410,201 | ||||||
|
|
|
| |||||
1,482,111 | 1,501,196 | |||||||
|
|
|
|
At September 30, 2015 and December 31, 2014, there were unused term credit facilities amounting to $539,846 and $569,342, respectively.
(9) Bonds
An analysis of bonds follows:
September 30, 2015 | December 31, 2014 | |||||||||||||||||||||||
Outstanding principal | Outstanding principal | |||||||||||||||||||||||
At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (period end) | At original exchange rate | At spot exchange rate | Weighted average cost, after swaps (%) (year-end) | |||||||||||||||||||
U.S. dollars | 6,962,858 | 6,962,858 | 1.96 | 6,109,320 | 6,109,320 | 2.03 | ||||||||||||||||||
Euro | 3,436,813 | 2,865,735 | 1.79 | 3,571,411 | 3,230,302 | 1.62 | ||||||||||||||||||
Swiss francs | 2,632,111 | 2,544,634 | 1.78 | 2,054,538 | 1,950,086 | 1.71 | ||||||||||||||||||
Australian dollars | 772,183 | 632,160 | 1.45 | 525,233 | 471,269 | 1.26 | ||||||||||||||||||
Hong Kong dollars | 386,060 | 386,442 | 1.77 | 386,060 | 386,212 | 1.69 | ||||||||||||||||||
Norwegian kroner | 524,197 | 399,690 | 1.52 | 390,828 | 323,777 | 1.43 | ||||||||||||||||||
Japanese yen | 367,433 | 283,977 | 2.68 | 418,819 | 294,807 | 2.45 | ||||||||||||||||||
Chinese renminbi | 96,618 | 94,392 | 1.37 | 96,618 | 96,660 | 1.37 | ||||||||||||||||||
Colombian pesos | 112,565 | 71,030 | 2.68 | 112,565 | 92,687 | 2.64 | ||||||||||||||||||
Mexican pesos | 98,108 | 77,606 | 2.67 | 98,108 | 89,545 | 2.67 | ||||||||||||||||||
Turkish lira | 70,101 | 51,810 | 0.45 | 70,089 | 67,408 | 0.34 | ||||||||||||||||||
Peruvian nuevos soles | 22,397 | 22,704 | 0.91 | 32,331 | 35,412 | 0.73 | ||||||||||||||||||
South African rand | 22,597 | 18,239 | 0.45 | 22,594 | 21,848 | 0.85 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
15,504,040 | 14,411,276 | 13,888,514 | 13,169,333 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Fair value adjustments | 706,290 | 690,607 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Carrying value of bonds | 15,117,566 | 13,859,940 | ||||||||||||||||||||||
|
|
|
|
29
A summary of the bonds outstanding, by remaining maturities, follows:
September 30, 2015 | December 31, 2014 | |||||||
Remaining maturities: | ||||||||
Less than one year | 2,310,763 | 1,264,543 | ||||||
Between one and two years | 2,037,179 | 1,560,577 | ||||||
Between two and three years | 2,187,164 | 2,086,958 | ||||||
Between three and four years | 1,166,189 | 1,315,182 | ||||||
Between four and five years | 316,932 | 937,189 | ||||||
Over five years | 7,485,813 | 6,724,065 | ||||||
|
|
|
| |||||
15,504,040 | 13,888,514 | |||||||
|
|
|
|
At September 30, 2015 and December 31, 2014 fixed interest rate bonds amounted to $14,832,341 and $13,059,963, respectively, of which $8,558,174 and $7,667,123, are denominated in Japanese yen, Euros, Swiss francs, Australian dollars, Colombian pesos, Mexican pesos, Hong Kong dollars, Norwegian kroner, Chinese renminbi, Peruvian nuevos soles, Turkish lira and South African rand.
There were no bonds repurchased during the nine-month period ended September 30, 2015 and 2014.
(10) Accrued Expenses and Other Liabilities
A summary of accrued expenses and other liabilities follows:
September 30, 2015 | December 31, 2014 | |||||||
Employees’ severance indemnities, benefits and savings plan | 77,102 | 68,382 | ||||||
Payable for investment securities purchased | 43,320 | 5,683 | ||||||
Derivatives related collateral | 133,174 | 99,413 | ||||||
Provision contingencies | 2,183 | 2,474 | ||||||
Other liabilities | 8,330 | 8,441 | ||||||
|
|
|
| |||||
264,109 | 184,393 | |||||||
|
|
|
|
(11) Accumulated Other Comprehensive Income
The changes to the balances of accumulated other comprehensive income and the reclassified amounts out of accumulated other comprehensive income that affected net income for nine-month periods ended September 30, 2015 and 2014, were as follows:
September 30, | ||||||||
2015 | 2014 | |||||||
Balances at beginning of the year | 32 | (317 | ) | |||||
Unrecognized changes in assets/ liabilities under benefit pension plan | — | 238 | ||||||
|
|
|
| |||||
Balances at end of the period | 32 | (79 | ) | |||||
|
|
|
|
(12) Tax Exemptions
In its full member countries, CAF is exempt from all taxes on income, properties and other assets; it is also exempt from liability related to the payment, withholding or collection of any tax or other levy.
30
(13) Derivative Financial Instruments and Hedging Activities
CAF utilizes derivative financial instruments to reduce exposure to interest rate risk and foreign currency risk. CAF does not hold or issue derivative financial instruments for trading or speculative purposes.
By using derivative financial instruments to hedge exposure to changes in interest rate and foreign exchange rates, CAF exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative financial instrument is positive, the counterparty owes CAF, creating credit risk for CAF. When the fair value of a derivative financial instrument is negative, CAF owes the counterparty and, therefore, it does not have credit risk. CAF minimizes the credit risk in derivative financial instruments by entering into transactions with high-quality counterparties whose credit rating is “A” or higher.
The market risk associated with interest rate and currency risk is managed by swapping loans and borrowings, subject to fixed interest rates and denominated in other currency into floating interest rate instruments denominated in U.S. dollars. CAF enters into derivative financial instruments with market risk characteristics that are expected to change in a manner that will offset the economic change in value of specifically identified loans, bonds or borrowings and other obligations. Derivative contracts held by CAF consist of interest rate and cross-currency swaps and are designated as fair value hedges of specifically identified loans, bonds or borrowings and other obligations with fixed interest rates or non U.S. currency exposure.
CAF also utilizes futures derivatives instruments to reduce exposure to risk. There are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument at a specified price or yield. Initial margin requirements are met with cash or securities. CAF generally closes out open positions prior to maturity. Therefore, cash receipts or payments are limited to the change in fair value of the future contracts.
CAF monitors the credit risk associated with derivative financial instruments. Credit risk is managed by establishing exposure limits based on the credit rating and size of the individual counterparty, among other factors. To further reduce the credit risk in derivative financial instruments, CAF enters into credit support agreements with its major swap counterparties. This provides risk mitigation, as the swap contracts are regularly mark-to-market, and the party being the net obligor is requested to post collateral when net mark to-market exposure exceeds certain predetermined thresholds, which decrease as the counterparty’s credit rating deteriorates. This collateral is in the form of cash or highly rated and liquid government securities.
CAF does not offset, for each counterparty, the fair value amount recognized for derivative financial instruments with the fair value amount recognized for the collateral, whether posted or received, under master netting arrangements executed with the same counterparty. CAF reports separately the cumulative gross amounts for the receivable from and payable to for derivative financial instruments.
At September 30, 2015 and December 31, 2014, balance sheet details related to CAF’s derivative financial instruments is as follows:
Derivative assets | Derivative liabilities | |||||||||||||||
September 30, 2015 | December 31, 2014 | September 30, 2015 | December 31, 2014 | |||||||||||||
Interest rate swap | 185,993 | 183,323 | 3,463 | 33,752 | ||||||||||||
Cross-currency swap | 137,157 | 199,790 | 673,398 | 349,150 | ||||||||||||
Cross-currency futures | — | — | 571 | 155 | ||||||||||||
Cross-currency forward contracts | 71 | 590 | 62 | 29 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
323,221 | 383,703 | 677,494 | 383,086 | |||||||||||||
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|
|
31
The following table presents the notional amount and fair values of interest rate swaps and cross-currency swaps and the underlying hedged items at September 30, 2015 and December 31, 2014:
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative liabilities | |||||||||||||
At September 30, 2015 — | ||||||||||||||||
Loans | — | 12,234 | 4,816 | — | ||||||||||||
Loans | 3,000 | — | — | 76 | ||||||||||||
Borrowings | — | 112,900 | — | 1,143 | ||||||||||||
Borrowings | 413,750 | — | 21,713 | 240 | ||||||||||||
Bonds | 6,212,803 | — | 164,280 | 3,148 | ||||||||||||
Bonds | — | 8,558,174 | 132,340 | 672,255 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
6,629,553 | 8,683,308 | 323,149 | 676,861 | |||||||||||||
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|
|
|
| |||||||||
Notional amount | Fair value | |||||||||||||||
Interest rate swap | Cross- currency swap | Derivative assets | Derivative liabilities | |||||||||||||
At December 31, 2014 — | ||||||||||||||||
Loans | — | 18,351 | 3,151 | 187 | ||||||||||||
Loans | 6,125 | — | — | 46 | ||||||||||||
Borrowings | 419,167 | — | 13,766 | 316 | ||||||||||||
Bonds | 5,357,840 | — | 169,557 | 33,390 | ||||||||||||
Bonds | — | 7,803,396 | 196,639 | 348,963 | ||||||||||||
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| |||||||||
5,783,132 | 7,821,747 | 383,113 | 382,902 | |||||||||||||
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At September 30, 2015 and December 31, 2014, the fair value amount recognized for the collateral received related to interest rate swaps and cross-currency swaps, under the master netting arrangements executed with the same counterparty, was $43,319 and $ 99,413, respectively. The amount recognized on collateral posted, at September 30, 2015 and December 31, 2014, was $387,335 and $132,959, respectively.
The following table presents the notional amount and fair values of cross-currency futures and forwards at September 30, 2015 and December 31, 2014:
Fair value | ||||||||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||||||||
At September 30, 2015 | �� | |||||||||||||||||||
Forward contracts | Various | Until Sep 2015 | Various | 23,757 | 71 | |||||||||||||||
|
|
|
|
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
At September 30, 2015 | ||||||||||||||
Forward contracts | Various | Until Sep 2015 | Various | 23,757 | (62 | ) | ||||||||
|
|
|
| |||||||||||
Futures long | Various | Until Nov 2015 | Various | 15,200 | (20 | ) | ||||||||
Futures short | Various | Until Nov 2015 | Various | (88,300 | ) | (551 | ) | |||||||
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|
| |||||||||||
(73,100 | ) | (571 | ) | |||||||||||
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|
32
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative assets | ||||||||||
At December 31, 2014 | ||||||||||||||
Forward contracts | Various | Until Sep 2015 | Various | 560 | 590 | |||||||||
|
|
|
|
Fair value | ||||||||||||||
Start date | Termination date | Contract Currency | Notional amount | Derivative liabilities | ||||||||||
At December 31, 2014: | ||||||||||||||
Forward contracts | Various | Until Sep 2015 | Various | (560 | ) | (29 | ) | |||||||
|
|
|
| |||||||||||
Futures | Nov/Dec 2014 | March 2015 | Various | 49,900 | (81 | ) | ||||||||
Futures | Nov/Dec 2014 | March 2015 | Various | 4,900 | (74 | ) | ||||||||
|
|
|
| |||||||||||
54,800 | (155 | ) | ||||||||||||
|
|
|
|
The amount recognized for the collateral posted related with futures at September 30, 2015 and December 31, 2014, was $4,304 and $1,374, respectively.
As of September 30, 2015 and December 31, 2014, all of CAF’s derivatives which had been designated as hedging relationship were considered fair valued hedges. The change in the fair value of such derivative financial instruments and the change in fair value of hedged items attributable to risk being hedged are included in the statements of comprehensive income.
CAF enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting arrangements with substantially all of its derivatives counterparties. These legally enforceable master netting arrangements give CAF the right to take cash or liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in the event of default by the counterparty. The following tables present information about the offsetting of derivative financial instruments, although CAF has elected not to offset any derivative financial instruments by counterparty in the balance sheet:
At September 30, 2015 Derivative Assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 323,149 | (236,650 | ) | (43,319 | ) | 43,180 | ||||||||||
|
|
|
|
Derivative Liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (676,861 | ) | 236,650 | 387,335 | (52,876 | ) | ||||||||||
|
|
|
|
At December 31, 2014 Derivative Assets | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized assets | Financial instruments | Cash and securities collateral received | Net amount | ||||||||||||
Swaps | 383,113 | (201,474 | ) | (99,413 | ) | 82,226 | ||||||||||
|
|
|
|
Derivative Liabilities | Gross amounts not offset in the balance sheet | |||||||||||||||
Description | Gross amounts of recognized liabilities | Financial instruments | Cash and securities collateral pledged | Net amount | ||||||||||||
Swaps | (382,901 | ) | 201,474 | 132,959 | (48,468 | ) | ||||||||||
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33
(14) Fair Value Measurements
The following section describes the valuation methodologies used by CAF to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models, as well as any significant assumptions.
When available, CAF generally uses quoted market prices to determine fair value, and classifies such items in Level 1. In some cases where a market price is not available, CAF makes use of appropriate valuation methodologies that require considerable judgment in developing and interpreting the estimates of fair value, in which case the items are classified in Level 2.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, etc. Items valued using such internally developed valuation techniques are classified according to the lowest level input or value driver that is significant to the fair value measurement. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.
Where available, CAF may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to the one being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2. If prices are not available, other valuation techniques would be used and the item would be classified as Level 3.
The following methods are used to estimate the fair value hierarchy of CAF’s financial instruments:
• | Marketable securities: CAF uses quoted market prices to determine the fair value of trading securities and these financial assets are classified in Level 1 of the fair value hierarchy. |
• | Loans: The fair value of fixed rate loans is determined using the current variable interest rate for similar loans. These loans are classified in Level 2 of the fair value hierarchy. |
• | Derivative assets and liabilities:Derivative transactions contracted and designated by CAF as hedges of risks related to interest rates, currency rates or both, for transactions recorded as financial assets or liabilities, are also presented at fair value. In those cases the fair value is calculated using market prices provided by the counterparties. Derivative assets and liabilities are classified in Level 2 of the fair value hierarchy. |
• | Bonds and borrowings: For CAF’s bonds and medium and long term borrowings, fair value is determined using an internal valuation technique, taking into consideration benchmark interest yield curves at the end of the reporting period to discount the expected cash flows for the applicable maturity, thus reflecting market fluctuation of key variables such as interest and exchange rates. These yield curves are adjusted to incorporate CAF’s credit risk spread. Those transactions are generally classified in Level 2 of the fair value hierarchy depending on the observability of significant inputs to the model. |
34
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels CAF’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
At September 30, 2015: | ||||||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 383,407 | — | — | 383,407 | ||||||||||||
Bonds of non-U.S. governments and government entities | 166,061 | — | — | 166,061 | ||||||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial papers | 2,470,960 | — | — | 2,470,960 | ||||||||||||
Certificate of deposits | 1,692,225 | — | — | 1,692,225 | ||||||||||||
Bonds | 1,497,888 | — | — | 1,497,888 | ||||||||||||
Collateralized mortgage obligation | 321,119 | — | — | 321,119 | ||||||||||||
Liquidity funds | 208,776 | — | — | 208,776 | ||||||||||||
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|
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| |||||||||
6,190,968 | — | — | 6,190,968 | |||||||||||||
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|
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| |||||||||
6,740,436 | — | — | 6,740,436 | |||||||||||||
Loans | — | 10,706 | — | 10,706 | ||||||||||||
Derivative instruments: | ||||||||||||||||
Interest rate swap | — | 185,993 | — | 185,993 | ||||||||||||
Cross-currency swap | — | 137,157 | — | 137,157 | ||||||||||||
Cross-currency forward contracts | — | 71 | — | 71 | ||||||||||||
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|
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|
|
|
|
| |||||||||
— | 323,221 | — | 323,221 | |||||||||||||
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| |||||||||
6,740,436 | 333,927 | — | 7,074,363 | |||||||||||||
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|
|
| |||||||||
Liabilities: | ||||||||||||||||
Borrowings | — | 547,475 | — | 547,475 | ||||||||||||
Bonds | — | 14,386,277 | — | 14,386,277 | ||||||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency futures | 571 | — | 571 | |||||||||||||
Interest rate swap | — | 3,463 | — | 3,463 | ||||||||||||
Cross-currency swap | — | 673,398 | — | 673,398 | ||||||||||||
Cross-currency forward contracts | — | 62 | — | 62 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
— | 677,494 | — | 677,494 | |||||||||||||
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|
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|
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|
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| |||||||||
— | 15,611,246 | — | 15,611,246 | |||||||||||||
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35
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
At December 31, 2014: | ||||||||||||||||
Assets: | ||||||||||||||||
Marketable Securities: | ||||||||||||||||
U.S. Treasury Notes | 1,920,441 | — | — | 1,920,441 | ||||||||||||
Bonds of non-U.S. governments and government entities | 195,373 | — | — | 195,373 | ||||||||||||
Financial institutions and corporate securities: | ||||||||||||||||
Commercial papers | 1,075,478 | — | — | 1,075,478 | ||||||||||||
Certificate of deposits | 2,264,749 | — | — | 2,264,749 | ||||||||||||
Bonds | 1,183,477 | — | — | 1,183,477 | ||||||||||||
Collateralized mortgage obligation | 292,214 | — | — | 292,214 | ||||||||||||
Liquidity funds | 199,059 | — | — | 199,059 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
5,014,977 | — | — | 5,014,977 | |||||||||||||
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|
|
|
|
|
|
| |||||||||
7,130,791 | — | — | 7,130,791 | |||||||||||||
Loans | — | 21,954 | — | 21,954 | ||||||||||||
Derivative instruments: | ||||||||||||||||
Interest rate swap | — | 183,323 | — | 183,323 | ||||||||||||
Cross-currency swap | — | 199,790 | — | 199,790 | ||||||||||||
Cross-currency forward contracts | — | 590 | — | 590 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 383,703 | — | 383,703 | |||||||||||||
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| |||||||||
7,130,791 | 405,657 | — | 7,536,448 | |||||||||||||
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|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Borrowings | — | 432,617 | — | 432,617 | ||||||||||||
Bonds | — | 13,124,319 | — | 13,124,319 | ||||||||||||
Derivative instruments: | ||||||||||||||||
Cross-currency futures | — | 155 | — | 155 | ||||||||||||
Interest rate swap | — | 33,752 | — | 33,752 | ||||||||||||
Cross-currency swap | — | 349,150 | — | 349,150 | ||||||||||||
Cross-currency forward contracts | — | 29 | — | 29 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
— | 383,086 | — | 383,086 | |||||||||||||
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| |||||||||
— | 13,940,022 | — | 13,940,022 | |||||||||||||
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|
During the nine-month period ended September 30, 2015 and the year ended December 31, 2014, there were no transfers between levels 1, 2 and 3.
36
Items that are not measured at fair value
The carrying amount and estimated fair values of CAF’s financial instruments that are not recognized in the balance sheets at fair value are as follows:
September 30, 2015 | December 31, 2014 | |||||||||||||||||||
Hierarchy Levels | Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | 1 | 298,573 | 298,573 | 141,147 | 141,147 | |||||||||||||||
Deposits with banks | 1 | 1,652,436 | 1,652,436 | 1,279,267 | 1,279,267 | |||||||||||||||
Other investments | 1 | 1,268,101 | 1,268,101 | 1,596,608 | 1,596,608 | |||||||||||||||
Loans, net | 2 | 19,115,421 | 19,119,142 | 18,976,959 | 18,981,432 | |||||||||||||||
Equity investments (Cost method) | 3 | 235,689 | 235,689 | 249,642 | 249,642 | |||||||||||||||
Accrued interest and commissions receivable | 2 | 328,251 | 328,251 | 292,325 | 292,325 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | 2 | 2,276,127 | 2,276,127 | 3,696,510 | 3,696,510 | |||||||||||||||
Commercial paper | 2 | 1,917,597 | 1,917,597 | 1,853,282 | 1,853,282 | |||||||||||||||
Borrowings | 2 | 955,461 | 954,642 | 1,082,029 | 1,083,696 | |||||||||||||||
Bonds | 2 | 731,289 | 729,970 | 735,830 | 737,349 | |||||||||||||||
Accrued interest payable | 2 | 248,603 | 248,603 | 239,547 | 239,547 |
(15) Commitments and Contingencies
Commitments and contingencies include the following:
September 30, 2015 | December 31, 2014 | |||||||
Loan commitments subscribed- eligibles | 4,875,537 | 5,281,911 | ||||||
Loan commitments subscribed- non eligibles | 2,485,115 | 2,836,455 | ||||||
Lines of credit | 4,561,064 | 4,718,975 | ||||||
Letters of credit | 10,097 | 16,776 | ||||||
Equity investments agreements subscribed | 275,879 | 286,149 | ||||||
Guarantees | 271,693 | 311,819 |
These commitments and contingencies result from the normal course of CAF’s business and are related principally to loans and loan equivalents that have been approved or committed for disbursement.
In the ordinary course of business, CAF has entered into commitments to extend loans; such loan commitments are reported in the above table upon signing the corresponding loan agreement and are reported as loans in the financial statements when disbursements are made. Loan commitments that have fulfilled the necessary requirements for disbursement are classified as eligible.
The commitments to extend loans have fixed expiration dates and in some cases expire without a loan being originated. Also, based on experience, portions of the loan commitments are originated two years after the signing of the loan agreement. Therefore, the amounts of total commitment to extend loans do not necessarily represent future cash requirements.
37
Guarantees mature as follows:
September 30, 2015 | December 31, 2014 | |||||||
Less than one year | 26,686 | 45,621 | ||||||
Between one and two years | 63,498 | 12,000 | ||||||
Between three and five years | 1,400 | 40,254 | ||||||
Over five years | 180,109 | 213,944 | ||||||
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|
|
| |||||
271,693 | 311,819 | |||||||
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|
|
|
(16) Segment Reporting
Management has determined that CAF has only one reportable segment since it does not manage its operations by allocating resources based on a determination of the contributions to net income of individual operations. CAF does not differentiate between the nature of the products or services provided, the preparation process, or the method for providing the services among individual countries.
For the nine-month periods ended September 30, 2015 and 2014, loans made to or guaranteed by seven countries individually generated in excess of 10% of interest income, before swaps, as follows (in thousands of U.S. dollars):
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
Argentina | 59,239 | 53,884 | ||||||
Bolivia | 38,904 | 34,605 | ||||||
Brazil | 41,526 | — | ||||||
Colombia | 30,666 | 35,555 | ||||||
Ecuador | 54,934 | 49,648 | ||||||
Peru | 47,696 | 49,894 | ||||||
Venezuela | 55,911 | 53,600 | ||||||
|
|
|
| |||||
328,876 | 277,186 | |||||||
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|
|
|
(17) Subsequent Events
As of the date of the issuance of these condensed interim financial statements there are no other significant subsequent events that require adjustments or disclosure, if applicable, which were not already considered in this note or disclosure in the financial statements, except for:
• | On October 21, 2015, CAF issued bonds for NOK 800 million, 3.05%, due 2030, under its Medium Term Notes Programme. |
• | In October 2015, CAF early adopted ASU 2015-03, Interest — Imputation of Interest. In previous years CAF presented the issuance costs in the balance sheet as deferred costs in other assets. Currently, with the adoption of this ASU, the issue costs are presented as a direct deduction from bonds and borrowings. |
• | As of December 31, 2015, CAF recognized U.S.$54,000 as an expense and maintains accounts payable for U.S.$16,000, related to the contributions to Special Funds for 2015. |
• | On November 3, 2015, CAF issued bonds for EUR 750 million, 1.00%, due 2020, under its Medium Term Notes Programme. |
• | On January 22, 2016, CAF issued bonds for ZAR 590 million, 9.00%, due 2020, under its Medium Term Notes Programme in the Uridashi market. |
• | On January 22, 2016, CAF issued bonds for TRY 192 million, 10.73%, due 2020, under its Medium Term Notes Programme in the Uridashi market. |
38
CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION (UNAUDITED)
AS OF SEPTEMBER 30, 2015
BONDS
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding at September 30, 2015 (in millions) | |||||||||||
7.79% Yankee Bonds | Fixed | 1997 | 2017 | USD | 50.0 | |||||||||||
7.875% Yankee Bonds | Fixed | 2002 | 2022 | USD | 85.0 | |||||||||||
5.125% Yankee Bonds | Fixed | 2005 | 2015 | USD | 250.0 | |||||||||||
5.75% Yankee Bonds | Fixed | 2006 | 2017 | USD | 250.0 | |||||||||||
Peruvian Soles Bonds | Fixed | 2006 | 2018 | PEN(2) | 73.4 | |||||||||||
5.75% Yankee Bonds | Fixed | 2007 | 2017 | USD | 115.4 | |||||||||||
5.75% Yankee Bonds | Fixed | 2008 | 2017 | USD | 250.0 | |||||||||||
Colombian Peso Bonds | Fixed | 2008 | 2018 | COP | 94,250.0 | |||||||||||
8.125% Yankee Bonds | Fixed | 2009 | 2019 | USD | 733.7 | |||||||||||
Colombian Peso Bonds | Fixed | 2009 | 2019 | COP | 127,500.0 | |||||||||||
4.30% Euro Yen Bonds | Fixed | 2009 | 2019 | JPY | 10,000.0 | |||||||||||
Structured Note | Floating | 2010 | 2017 | USD | 50.0 | |||||||||||
3.75% Yankee Bonds | Fixed | 2010 | 2016 | USD | 600.0 | |||||||||||
Structured Note | Floating | 2010 | 2017 | USD | 50.0 | |||||||||||
2.625% Swiss Franc Bonds | Fixed | 2010 | 2015 | CHF | 250.0 | |||||||||||
4.625% Euro Bond | Fixed | 2010 | 2018 | EUR | 400.0 | |||||||||||
1.82% Samurai Bonds | Fixed | 2010 | 2015 | JPY | 4,600.0 | |||||||||||
3.625% Panamanian Bonds | Fixed | 2011 | 2016 | USD | 40.0 | |||||||||||
3.75% Yankee Bonds | Fixed | 2011 | 2016 | USD | 500.0 | |||||||||||
Mexican Pesos Bonds | Fixed | 2011 | 2021 | MXN(3) | 1,317.0 | |||||||||||
2.625% Swiss Franc Bonds | Fixed | 2011 | 2015 | CHF | 130.0 | |||||||||||
2.75% Swiss Franc Bonds | Fixed | 2011 | 2017 | CHF | 125.0 | |||||||||||
4.625% Euro Bonds | Fixed | 2011 | 2018 | EUR | 250.0 | |||||||||||
1.0% Samurai Bonds | Fixed | 2011 | 2015 | JPY | 10,000.0 | |||||||||||
5.0% Euro Dollar Bond | Fixed | 2012 | 2042 | USD | 50.0 | |||||||||||
4.375% Yankee Bonds | Fixed | 2012 | 2022 | USD | 1,092.9 | |||||||||||
4.375% Yankee Bonds | Fixed | 2012 | 2022 | USD | 407.1 | |||||||||||
1.5% Swiss Franc Bonds | Fixed | 2012 | 2018 | CHF | 300.0 | |||||||||||
3.55% Dim Sum | Fixed | 2012 | 2015 | CNY(7) | 600.0 | |||||||||||
Euro Bond(Schuldschein) | Fixed | 2012 | 2027 | EUR | 82.0 | |||||||||||
Euro Bond(Schuldschein) | Fixed | 2012 | 2032 | EUR | 60.0 | |||||||||||
4.03% Euro Hong Kong Dollar Bonds | Fixed | 2012 | 2022 | HKD(8) | 400.0 | |||||||||||
4.0% Euro Hong Kong Dollar Bonds | Fixed | 2012 | 2024 | HKD | 398.0 | |||||||||||
1.85% Euro Yen Bonds | Fixed | 2012 | 2023 | JPY | 6,000.0 | |||||||||||
1.375% Swiss Franc Bonds | Fixed | 2013 | 2021 | CHF | 250.0 | |||||||||||
Euro Dollar Bond | Floating | 2013 | 2016 | USD | 100.0 | |||||||||||
3.25% Euro Bonds | Fixed | 2013 | 2033 | EUR | 100.0 | |||||||||||
1.375% Swiss Franc Bonds | Fixed | 2013 | 2021 | CHF | 100.0 | |||||||||||
3.25% Euro Bonds | Fixed | 2013 | 2033 | EUR | 100.0 | |||||||||||
4.27% Euro Hong Kong Dollar Bonds | Fixed | 2013 | 2028 | HKD | 940.0 | |||||||||||
Euro Dollar Bonds | Floating | 2013 | 2023 | USD | 100.0 | |||||||||||
1.50% Swiss Franc Bonds | Fixed | 2013 | 2020 | CHF | 250.0 | |||||||||||
3.66% Euro Bond | Fixed | 2013 | 2033 | EUR | 51.0 |
39
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding at September 30, 2015 (in millions) | |||||||||||
1.85% Euro Yen Bonds | Fixed | 2013 | 2023 | JPY | 4,600.0 | |||||||||||
4.25% Kangaroo Bonds | Fixed | 2013 | 2016 | AUD(9) | 350.0 | |||||||||||
3.625% Euro Bond(Schuldschein) | Fixed | 2013 | 2033 | EUR | 200.0 | |||||||||||
Euro Dollar Bonds | Floating | 2013 | 2015 | USD | 200.0 | |||||||||||
6.25% Kangaroo Bonds | Fixed | 2013 | 2023 | AUD | 225.0 | |||||||||||
3.31% Euro Bonds | Fixed | 2013 | 2028 | EUR | 250.7 | |||||||||||
3.51% Euro Bonds | Fixed | 2014 | 2034 | EUR | 65.0 | |||||||||||
2.0% Euro Bonds | Fixed | 2014 | 2024 | CHF | 300.0 | |||||||||||
3.500% Euro Bonds | Fixed | 2014 | 2039 | EUR | 200.0 | |||||||||||
4.29% Euro Bonds | Fixed | 2014 | 2026 | NOK(10) | 1,500.0 | |||||||||||
4.070% Euro Bonds | Fixed | 2014 | 2024 | NOK | 900.0 | |||||||||||
3.925% Euro Bonds | Fixed | 2014 | 2029 | HKD | 1,257.0 | |||||||||||
3.05% Euro Bonds | Fixed | 2014 | 2030 | EUR | 50.0 | |||||||||||
Euro Dollar Bonds | Floating | 2014 | 2017 | USD | 200.0 | |||||||||||
1.875% Euro Bonds | Fixed | 2014 | 2021 | EUR | 750.0 | |||||||||||
1.500% Yankee Bonds | Fixed | 2014 | 2017 | USD | 1,000.0 | |||||||||||
1.50% Swiss Franc Bonds | Fixed | 2014 | 2028 | CHF | 225.0 | |||||||||||
6.5% ZAR Uridashi Bonds | Fixed | 2014 | 2018 | ZAR(11) | 253.0 | |||||||||||
7.35% TRY Uridashi Bonds | Fixed | 2014 | 2018 | TRY(12) | 157.0 | |||||||||||
Yankee Bonds | Floating | 2015 | 2018 | USD | 1,000.0 | |||||||||||
0.51% Swiss Franc Bonds | Fixed | 2015 | 2026 | CHF | 200.0 | |||||||||||
1.9% Euro Dollar Bonds | Fixed | 2015 | 2019 | USD | 50.0 | |||||||||||
0.68% Euro Yen Bonds | Fixed | 2015 | 2025 | JPY | 8,900.0 | |||||||||||
0.51% Swiss Franc Bonds | Fixed | 2015 | 2026 | CHF | 150.0 | |||||||||||
3.05% Euro Bonds | Fixed | 2015 | 2035 | NOK | 1,000.0 | |||||||||||
4.50% Kangaroo Bonds | Fixed | 2015 | 2025 | AUD | 325.0 | |||||||||||
2.21% Euro Dollar Bonds | Fixed | 2015 | 2020 | USD | 50.0 | |||||||||||
0.46% Swiss Franc Bonds | Fixed | 2015 | 2023 | CHF | 200.0 |
Note: | From September 30, 2015 to the date of this free writing prospectus, CAF has issued two bonds, one for NOK 800 million and another for EUR 750 million. |
(1) | Yen. |
(2) | Peruvian Nuevos Soles. |
(3) | Mexican Pesos. |
(4) | Swiss Francs. |
(5) | Colombian Pesos. |
(6) | Euros. |
(7) | Chinese Renminbi. |
(8) | Hong Kong Dollars. |
(9) | Australian Dollars. |
(10) | Norwegian Kroner. |
(11) | South African rand. |
(12) | Turkish Lira. |
40
LOANS FROM COMMERCIAL BANKS, ADVANCES, DEPOSITS,
COMMERCIAL PAPER AND REPURCHASE AGREEMENTS
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding at September 30, 2015 | |||||||
(in U.S.$ millions) | ||||||||||||
Medium and Long-term Loans | Various | Various | Various | Various | 1,502.9 | |||||||
Deposits | Floating | Various | Various | Various | 2,276.1 | |||||||
Commercial Paper | Floating | Various | Various | USD | 1,917.6 |
LOANS FROM MULTILATERALS AND BILATERALS, EXIMS AND EXPORT CREDIT AGENCIES
Title | Interest Rate | Date of Agreement of Issue | Year of Final Maturity | Currency | Principal Amount Outstanding at September 30, 2015 (in U.S.$ millions) | |||||||
AB Svensk Exportkredit — SEK | Floating | 19-Dec-13 | 19-Dec-18 | US | 30.0 | |||||||
ACDI | 0% | 30-Mar-97 | 30-Sep-23 | CAN(1) | 0.8 | |||||||
Agencia Francesa de Desarrollo | Floating | Various | Various | Various | 333.0 | |||||||
China Development Bank — CDB | Floating | 29-Nov-07 | 29-Nov-19 | US | 67.5 | |||||||
IADB | 2% | 24-May-97 | 24-May-23 | US | 0.7 | |||||||
Instituto de Crédito Oficial — ICO | Floating | 28-May-08 | 15-Mar-18 | US | 10.9 | |||||||
JBIC, Japan | Floating | 03-Jul-12 | 15-Nov-20 | US | 66.0 | |||||||
KfW (Germany) | Various | Various | Various | US | 543.9 | |||||||
Nordic Investment Bank | Floating | Various | Various | US | 39.8 |
(1) | Canadian dollars. |
41
CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION (UNAUDITED)
AS OF SEPTEMBER 30, 2015
GUARANTEED DEBT
Borrower | Date of Issue | Year of Final Maturity | Principal Amount Outstanding at September 30, 2015 | |||||||||
(in U.S.$ millions) | ||||||||||||
Plurinational State of Bolivia | 10/03/2001 | 04/03/2018 | 11.2 | |||||||||
Plurinational State of Bolivia | 05/22/2004 | 05/22/2018 | 20.5 | |||||||||
Republic of Peru | 02/13/2006 | 02/13/2025 | 28.0 | |||||||||
Unión Andina de Cementos S.A.A. (as successor to Cemento Andino S.A. Peru) | 07/15/2010 | 07/13/2018 | 31.4 | |||||||||
Instituto de la función registral del Estado de México | 08/23/2010 | 08/23/2030 | 30.5 | |||||||||
Teyma Uruguay S.A. | 10/21/2014 | 04/20/2016 | 3.0 | |||||||||
Teyma Uruguay S.A. | 10/21/2014 | 04/20/2016 | 9.0 | |||||||||
Isolux Corsan Argentina S.A. | 09/15/2011 | 09/15/2023 | 34.7 | |||||||||
H2Olmos S.A. | 10/24/2012 | 10/25/2032 | 25.6 | |||||||||
Termochilca S.A.C. | 12/21/2011 | 12/21/2021 | 43.2 | |||||||||
Abengoa Transmisión Norte. | 06/21/2013 | 06/21/2016 | 5.0 | |||||||||
Banco Bisa | 02/03/2015 | 08/01/2017 | 0.4 | |||||||||
La Hipotecaria S.A. | 03/16/2015 | 03/16/2018 | 1.7 | |||||||||
La Hipotecaria S.A | 09/18/2015 | 09/18/2018 | 1.4 | |||||||||
Planta de Reserva Fría de Generación de Eten S.A | 12/05/2013 | 12/05/2033 | 18.1 | |||||||||
Mota Engil Peru S.A. | 05/13/2015 | 06/30/2015 | 1.2 | |||||||||
Mota Engil Peru S.A. | 10/22/2014 | 10/22/2015 | 1.7 | |||||||||
Mota Engil Peru S.A. | 11/14/2014 | 10/08/2015 | 6.0 |
42