S&P affirms Int'l Finance Facility for Immunisation at 'AA+/A-1+'

Mon Dec 17, 2012 5:10pm EST

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Overview
     -- We have reviewed our ratings on International Finance Facility for 
Immunisation (IFFIm) under our revised criteria.
     -- We are affirming our 'AA+/A-1+' long- and short-term issuer credit 
ratings on IFFIm.
     -- The outlook remains negative, reflecting the negative outlooks on the 
IFFIm donor sovereigns.

Rating Action
On Dec. 17, 2012, Standard & Poor's Ratings Services affirmed its 'AA+/A-1+' 
long- and short-term issuer credit ratings on International Finance Facility 
for Immunisation (IFFIm). The outlook is negative.

Rationale
The ratings on IFFIm reflect the commitment of its highly rated grantors to 
its compelling mandate of supporting child immunization programs in the 
poorest of the world's developing countries. Our ratings on IFFIm remain 
unchanged under our revised criteria: "Multilateral Lending Institutions And 
Other Supranational Institutions Ratings Methodology," published Nov. 26, 
2012, on RatingsDirect on the Global Credit Portal. 

IFFIm is a multilateral development institution established as a charity in 
the U.K. in 2006. Its purpose is to accelerate the funding of the immunization 
and vaccine procurement programs of the Global Alliance (GAVI), a 
public-private partnership whose members include: the World Health 
Organization; the U.N. Children's Fund (UNICEF); the International Bank for 
Reconstruction and Development (IBRD; commonly referred to as the World Bank; 
AAA/Stable/A-1+); the Bill and Melinda Gates Foundation; governments of both 
developing and industrialized countries; research and health institutes; 
vaccine producers; and civil society organizations. Seventy of the world's 
poorest countries are eligible to receive funds raised by IFFIm. IFFIm 
operates by issuing bonds on the basis of commitments by sovereign governments 
to provide annual grants over two decades and disbursing the proceeds to fund 
GAVI's programs. This not only provides greater funds to GAVI in the near 
term, but it also enhances GAVI's ability to provide multiyear grants to 
recipient countries.

Since the U.K. (unsolicited ratings AAA/Negative/A-1+), Italy (unsolicited 
ratings BBB+/Negative/A-2), France (unsolicited ratings AA+/Negative/A-1+), 
Spain (BBB-/Negative/A-3, Sweden (AAA/Stable/A-1+), and Norway 
(AAA/Stable/A-1+) established IFFIm in 2006, three more governments have made 
pledges: South Africa (BBB/Negative/A-2), the Netherlands (unsolicited ratings 
AAA/Negative/A-1+), and Australia (unsolicited ratings AAA/Stable/A-1+). 
Together, these pledges total nearly US$6.3 billion. Brazil (BBB/Stable/A-2) 
has also announced its intention to become a grantor, and IFFIm is seeking 
additional contributions. (All ratings are foreign currency.)

Under our revised criteria, we determine support for GAVI, and thus for IFFIm, 
by evaluating the support of IFFIm's strongest shareholders. Although IFFIm 
continues to experience payment delays on pledges from a few donors, these are 
principally donors rated below Standard & Poor's issuer credit rating on 
IFFIm. For those governments that are rated at or above IFFIm that have made 
late donor payments, these have been short and infrequent: we consider them to 
be administrative in nature and not reflective of the donors' ability or 
willingness to support this funding vehicle for GAVI. In determining adequacy 
of future donor flows to support debt service, we compare expected cash flows 
from donors rated at or above IFFIm with IFFIm's cash outflows. Our debt 
service coverage ratio for this multilateral aid agency, which measures the 
total value of remaining IFFIm donor flows from 'AA+' and 'AAA' rated donors, 
divided by total debt service remaining to be paid, was about 2.0x, as of Dec. 
14, 2012. IFFIm's own measure of its leverage, its gearing ratio, which 
measures the amount of its financial obligations divided by the net present 
value of expected payments from all donors, stood at 44% as of Sept. 30, 2012.

To reduce foreign exchange exposure of grants, which are made in the donors' 
local currency, and to transform fixed-rate borrowings into floating rate, 
IFFIm has conducted a series of long-dated swap agreements with the IBRD, its 
treasury manager and unique derivative counterparty. Given the duration of 
these agreements and that different yield curves are used to calculate the 
mark-to-market exposures, the aggregate net payables under these swaps can 
vary substantially. We understand that these exposures should narrow to zero 
over the life of the contracts. We expect that these exposures will not entail 
IFFIm having related cash requirements or posting counterparty collateral, 
which could affect its ability to disburse funds to GAVI.

IFFIm is at risk if its eligible grant-recipient countries go into protracted 
arrears to the International Monetary Fund (IMF). Donor countries are released 
from a portion of their scheduled annual payments under their pledges, the 
amount depending on the extent to which IFFIm-eligible countries are in 
protracted arrears to the IMF (late more than six months). 

Finally, IFFIm incurs roll-over risk, as its debt financing is for shorter 
tenors than its grants. To allay part of this funding risk, IFFIm maintains a 
minimum liquidity equivalent to its cumulative contracted debt service 
payments for the next 12 months. This minimum is recalculated and reset 
quarterly. As of Dec. 31, 2011, the calculated minimum liquidity was US$595 
million; as of the same date, total cash and funds held in trust were US$852 
million.

Outlook
The outlook is negative, reflecting the negative outlooks on several of 
IFFIm's highly rated donor governments. If we were to lower more of the 
ratings on IFFIm's donor governments--particularly those on the U.K. or 
France, its largest donor governments--or our ratings on the IBRD, we could 
lower our rating on IFFIm as well. In addition, downward pressure on the 
ratings could arise if highly rated donors began running payment arrears to 
IFFIm, if substantially more beneficiary governments go into protracted 
arrears to the IMF, or if IFFIm experienced funding pressure. On the other 
hand, if the ratings on IFFIm's donors stabilize and if, in our view, other 
risks diminish, the rating on IFFIm could stabilize as well. 

Related Criteria And Research
Multilateral Lending Institutions And Other Supranational Institutions Ratings 
Methodology, Nov. 26, 2012

Ratings List
International Finance Facility for Immunisation 
Ratings Affirmed
Issuer credit rating      AA+/Negative/A-1+
Senior unsecured          AA+


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
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