Paul Hastings LLP, a leading global law firm advised responsAbility Investments AG on the $175 million impact securitization of loans, one of only a few such securitizations ever issued. The Paul Hastings team was led by partner Scott Faga.
Washington, DC - Securitization of loans has been a popular and effective tool for attracting a broader pool of lenders and creating liquid, secondary markets. Recently, the model has been considered as a way to securitize loans for impact investments, and this securitization may have the power to play a transformative role in the financing of myriad socially important initiatives.
responsAbility Investments AG (responsAbility), the international impact asset manager, closed a $175 million microfinance securitization on July 17, one that may serve as a template for making microfinance – and other impact investing opportunities – more accessible to a range of investors in the future. For this securitization, the first microfinance securitization in over a decade, the proceeds will be used to fund financial intermediaries providing capital to 30,000 small businesses and 5.6 million microfinance borrowers, 81% of whom are women.
The transaction, on which Paul Hastings advised responsAbility, will initially be backed by loans to 26 microfinance institutions and small and medium-sized enterprise (SME) banks. As a result, borrowers are able to access global capital markets in a way they couldn’t on their own. The transaction also enables large institutional investors to contribute to financial inclusion in developing countries, earn a commercial return, and diversify their exposure across multiple borrowers and geographies.
“This securitization shows that the fast-growing microfinance and SME finance space in emerging markets has now reached a maturity that allows it to access financing from mainstream capital markets,” noted Thomas Müller, Co-Head Financial Institutions Debt at responsAbility.
responsAbility serves as the originator and servicer of the loan portfolio and JP Morgan acted as arranger and placement agent. Key investors include the Overseas Private Investment Corporation (OPIC), and Alecta, the fifth largest occupational pension provider in Europe. Impact investing firm Calvert Impact Capital also contributed U.S. private capital.
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