The bonds are structured such that they will be retired from future cash flows in which the rights, privileges and benefits derived from the concession contract for the provision of the fleet concluded between the concession Patio Calle 80 and the Empresa de Transporte del Tercer Milenio – Transmilenio S.A. (“TMSA”). Likewise, the structure has a contingent liquidity line from the FDN for up to 12% of the total issue value, to cover debt service and the costs of sustaining the issue.

The bonds were 160% oversubscribed.

This operation is part of FDN’s work to seek new sources of financing for the country’s infrastructure, helping to close market gaps and promote the development of capital markets as a viable alternative for the financing of infrastructure projects.

According to the FDN, this is the first time in Colombia that a bond issuance meets the eligibility criteria established in the Sustainability Bond Guidelines, promoted by the International Capital Market Association (ICMA). Sustainalytics, a global leader in corporate governance research, qualification and analysis in environmental, social and responsible investment strategies, issued the second opinion validating compliance principles of green bonds and social bonds, since funding resources are directed to activities that contribute to pollution prevention and control, clean transport and improvement of affordable basic infrastructure.

Alianza Fiduciaria was the transaction management agent, and Alianza Securities and Credicorp Capital were the placing agents.

In order to minimize the risk of the operation and incentivize the best quality in the provision of the service, the new concession model for Phase I and II of Transmilenio separated the procurement process into two components: the purchase and provision of the bus fleet on one hand, and the operation and maintenance of the fleet and maintenance yards by the other.  Under the new model, specialization, knowledge and efficiency were sought both in the purchase of buses and in their operation and maintenance, as well as the management of the maintenance facilities. In addition, the concession sought to minimize operational risk, improve the quality of service for users, facilitate the achievement of financing for the acquisition of the fleet and ensure the sustainability of the system.

The market demand of 1.2 billion pesos in bids was four times greater than the issuance level. Even before this figure was known, María Lorena Gutiérrez, Colombia’s minister of commerce, industry, and, tourism, said last week that the issuance could be later be extended by another $35 million USD.

Gutiérrez added that the ministry expects these bonds to help promote employment in areas of need and finance basic infrastructure — including drinking water, sewers and transportation — as well as health, education, and housing projects.

Bancóldex President Mario Suárez Melo highlighted the benefits the bonds will have for small business. “As a development bank for business growth, part of our purpose is to channel capital for micro and small entrepreneurs to formalize and access loans under favorable conditions that allow them to grow their businesses,” said Suárez.

The Bogotá-based development bank’s president added that the funds will support projects in line with Colombia’s effort to make progress in reaching the UN Sustainable Development Goals. Specifically, he said this will support “projects related to employment generation and formalization, inequality reduction, support to rural economies, access to credit, men/women wage gap reduction, and integration of excluded sectors into the productive economy.”

The bonds, which have terms of three and five years, were issued through the Colombian stock exchange, Bolsa de Valores de Colombia (BVC).

Bancóldex issued the bond with technical support from the Inter-American Development Bank (IDB) through a technical assistance program financed by Switzerland’s State Secretariat for Economic Affairs (SECO) in coordination with the Swiss embassy in Colombia.

The bond structure was reviewed by Sustainalytics, a Dutch firm that rates the sustainability of listed companies based on their environmental, social, and corporate governance performance.

“There is a huge opportunity for the private sector and individual investors to participate in a country’s development,” said Rafael de la Cruz, Andean region manager for the Inter-American Development Bank. “This type of instruments helps democratize participation in the financing of issues that are crucial for the development agenda, and at the same time boosts public investment transparency.”

READ MORE: Bancóldex Will Not Finance Public Transport Vehicles that Operate on Diesel

This marks the second time Bancóldex has made a large bond issuance that includes social goals in the past year. Last August, the bank issued some 200 billion pesos (nearly $70 million USD) in green bonds intended to finance projects that can help deal with the effects climate change. This issuance was also supported by IDB and SECO.

Along similar lines, Bancóldex also recently announced that it would no longer finance public transportation vehicles that run on diesel in an attempt to combat the country’s issues with air quality and pollution. Suárez categorized the decision as “a reaffirmation of a policy in line with improving quality of life of our population.”