Outline

 Overview of Flexible Loan Product (FLP) – Sovereign borrowers

• Main Features
• Loan Charges
• Conversion Options
• Interest rate conversion
• Transaction Fees

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 FLP Main Features – Sovereign Borrowers
• Interest Rate Conversion • USD, JPY, Euro
• Other currencies in which ADB can efficiently intermediate
• Currency Conversion

• Cost-base USD: 6-month SOFR

Rate compounded in arrears
JPY: 6-month TONA
compounded in arrears
Euro: 6-month Euribor
• Full or Partial Other currencies in which
ADB can efficiently
intermediate: Recognized
floating rate benchmark for

• Commitment- • Annuity
FLP • Effective
Contractual
other currencies
0.50% for loans negotiated
on or after 1 January 2014
linked • Straight- Spread
Line
• Custom- • Maturity Sovereign and sovereign-
tailored Premium guaranteed borrowers (for
• Bullet loans approved on or after
1 Jan 2021)
• Disbursement- • Straight-
linked Line
• (Rebates) or (US Dollar 0.19%
Surcharges on for 1 Jan – 30 Jun 2023
Funding Cost
Margin
Eliminated for loans negotiated
FLP= Flexible Loan Product on or after 1 Oct 2007

0.15% based on the undisbursed

Information as of Jan 2023 balance of loan
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 Loan Charges (USD,JPY & EUR ) –
Sovereign FLP
Loan Charges Basis USD JPY EUR
A. Lending Rate
Adjusted every 6 6-month SOFR 6-month TONA
Cost Base Rate months for floating rate compounded in compounded in 6-month EURIBOR
loans arrears arrears
Fixed for the life of the
Effective Contractual
loan (Formal Loan 0.50%
Spread
Negotiation Date)

C0 B and C1 C2 C3 C4
Maturity Premium ≤ 9 years NIL NIL NIL NIL NIL
Fixed for the life of the > 9 years and up to 13 years NIL NIL 0.10% 0.20% 0.40%
(for loans approved loan (Average Loan >13 years and up to 16 years NIL 0.10% 0.20% 0.30% 0.50%
on or after 1 Jan Maturity)
> 16 years and up to 19 years NIL 0.20% 0.30% 0.50% 0.75%
2021)
(with limit of 19 years average loan maturity)

Rebate/Surcharge Adjusted every 6 + 0.19% - 0.33% + 0.02%

on Funding Cost months (Applicable for (Applicable for (Applicable for
Margin (ADB calculation) 1 Jan – 30 Jun 2023) 1 Jan – 30 Jun 2023) 1 Jan – 30 Jun 2023)

Based on undisbursed
B. Commitment Charge 0.15%
balance
C. Front-End Fee Not applicable* - - -

* In general, front-end fee is not applicable for most lending modalities

Information as of Jan 2023
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Rebate/Surcharge on Funding Cost Margin

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Example: Lending Rates (USD,JPY & EUR _ Floating Rate) for
Sovereign FLP
(Lending rate for Loan No. XXXX-DMC; Average Loan Maturity = 12.75 years )
Item USD | JPY EUR
Cost Base Rate SOFR compounded over 6- | TONA compounded over 6- 6-month EURIBOR
month interest periods month interest periods
(Adjusted every 6 months)
determined in arrears determined in arrears

Effective Contractual 0.50% 0.50% 0.50%

Spread (Fixed)
Maturity Premium 0.00% 0.00% 0.00%
(Fixed)
Rebate/Surcharge on 0.19% -0.33% 0.02%
Funding Cost Margin
(Adjusted every 6 months -
ADB calculation)

Net Lending Rate * 6-month SOFR compounded 6-month TONA compounded 6-month EURIBOR +
in arrear+ 0.69 % in arrears+ 0.17 % 0.52%

Net Lending Rate a** + 0.69% b** +0.17 % 2.928+0.52

as of 27 Jan 2023** 4.82% (estimated) + 0.02% (estimated) + = 3.448%
(varies) 0.69% = 5.51% 0.17% = 0.19%

* Floor rate of zero will apply if the net lending rate is negative.
**6-month SOFR / TONA compounded in arrear will only be determined after the end of interest period
Note: The net lending rate varies over the life of the fixed rate loan since rebate/surcharge is adjusted every 6 months.
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 Normalized USD-INR, EUR-INR & JPY-INR Exchange rates:
Jan 2003- Jan 2023

USD-INR ( white line), EUR-INR (blue line), JPY-INR (red line)

Note: Over the past 20 years, USD has appreciated against INR by 70.70 %, EUR has appreciated by 71.59% and
JPY has appreciated by 58.20 %
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 Nomalized USD-INR, EUR-INR & JPY-INR Exchange rates:
Jan 2013- Jan 2023

USD-INR ( white line), EUR-INR (blue line), JPY-INR (red line)

Note: Over the past 10 years, USD has appreciated against INR by 53.29 %, EUR has appreciated by 23.14.38%
and JPY has appreciated by 8.42 %
INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
 Conversion Options

• Borrowers may change the original selection of currency

choice and interest basis of their loan

• Borrowers can use the conversion provisions in the Loan

Agreement, subject to relevant provisions of;

• Ordinary Operations Loan Regulations

• Conversion Guidelines

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 Interest Rate Conversion

With FLP, borrowers may change the interest rate basis of

their loan:
• For all or part of disbursed balance, and
• For all or part of the remaining life

Borrowers may request a conversion:

• At disbursement
• Anytime after disbursement
• Through a Specified Rate Fixing schedule
• At regular time intervals (Specified Rate Fixing by Period)
• When disbursement reaches a threshold amount (Specified
Rate Fixing by Amount)

After conversion new lending rates would reflect cost of

corresponding hedge transaction

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 Example: Lending Rate – FLP
(Indicative lending rate for Loan XXXX-DMC; Average Loan Maturity = 12.75 years)
Item JPY JPY
Cost Base Rate 6-month TONA compounded Fixed Swap Rate
in arrears
Effective Contractual 0.50% 0.50%
Spread (Fixed)
Maturity Premium (Fixed) 0.00% 0.00%

Rebate/Surcharge on -0.33% -0.33%

Funding Cost Margin
(Adjusted every 6 months -ADB
calculation)

Net Lending Rate ** 6-month TONA compounded Fixed Swap Rate

(varies) in arrears + 0.17 %
+ 0.17%
Net Lending Rate 0.02 (estimated) + 0.17%= 1.07 + 0.17%=
as of 27 Jan 2023** 0.19% 1.24%
(varies)

**Floor rate of zero will apply if the net lending rate is negative .
*** 6-month SOFR/TONA compounded in arrear will only be determined at the end of the interest period.

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 Conversion Transaction Fees

Interest Rate Conversions

 Initial rate fixings for up to the full maturity
of the loan for amounts up to the
outstanding loan amount
No charge

 Additional rate fixing/unfixing

0.0625%

Currency Conversions
 Un-disbursed loan amounts

0.0625%
 Disbursed loan amount
Conversion fees are expressed as percentage of the principal amount
involved and it is a one-time fee payable at the time of conversion
0.125%
except for local currency conversions.
 Local Currency conversion
For Local currency conversion, an annual fee of 0.02% of the
outstanding principal hedged amount will be charged to the borrower.
0.02% p.a.

Interest Rate Caps and Collars

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 Indicative Fixed Rate Disbursement / Conversion:
SOFR Loans

 https://www.adb.org/what-we-do/public-sector-financing/lending-policies-rates

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 Useful Information on ADB’s Website
ADB’s Flexible Loan https://www.adb.org/sites/default/files/
Product (FLP) brochure adb-flexible-loan-product.pdf

FLP at a Glance – https://www.adb.org/sites/default/files/

Sovereign Borrowers flp-overview.pdf

Information on LIBOR https://www.adb.org/what-we-do/public-

Transition sector-financing/libor-transition

Guidelines for conversion of https://www.adb.org/documents/

loan terms for ADB’s FLP guidelines-conversion-loan-terms-adb-
flexible-loan-product

INTERNAL. This information is accessible to ADB Management and staff. It may be shared outside ADB with appropriate permission.
Thank you.