A group of 11 private insurers are providing more than fifty percent reinsurance to facilitate the largest debt conversion for marine conservation to protect the Galápagos.
The reinsurance for the project is provided by AXA XL, Fidelis MGU, Chubb Global Markets, Sovereign Risk Insurance Ltd, Mosaic, and others.
It’s part of the project that has seen the Government of Ecuador, the U.S. International Development Finance Corporation (DFC), the Inter-American Development Bank (IDB), Credit Suisse, Oceans Finance Company (OFC), and the Pew Bertarelli Ocean Legacy, announce the financial close of a $656 million Galápagos marine conservation-linked bond.
The bond was arranged and structured by Credit Suisse, and was used to finance a debt conversion for Ecuador exchanging $1.628 billion of its international bonds for a $656 million loan. Credit Suisse acted as offeror for the international bonds.
Under the arrangement, DFC is providing $656 million in political risk insurance for the Loan, while IDB is providing an $85 million guarantee. Through this debt conversion, Ecuador will realize more than $1.126 billion lifetime savings through reduced debt service costs.
It is estimated that the debt conversion will generate $323 million for marine conservation in the Galápagos Islands over the next 18.5 years, including approximately $12.05 million of new funding annually and around $5.41 million annually, on average, to capitalize an endowment for the Galapagos Life Fund (GLF).
“The endowment, which will be a source of permanent funding for the GLF to continue supporting marine conservation projects beyond the term of the transaction, is estimated to grow to more than $227 million by 2041. Combined, the debt conversion and endowment will generate more than $450 million for marine conservation in the Galápagos Islands,” reads the announcement.
Ramzi Issa, Global Head of Credit Investor Products Structuring at Credit Suisse, said: “This is a vital transaction for one of the most important marine ecosystems on Earth, the Galápagos, providing it with significant funding for generations while reducing Ecuador’s debt service costs at the same time. It could only have been achieved through collaboration, teamwork and leadership: we’re pleased to have worked so closely with Ecuador, Pew Bertarelli Ocean Legacy, DFC, IDB, CFM together with OFC, and others to make this transaction possible. Ecuador, alongside its partners, is innovating for conservation, capturing the power and potential of private capital to solve pressing issues facing the environment and society more broadly.”
“Partnering with Ecuador, Pew Bertarelli Ocean Legacy, DFC, IDB, CFM together with OFC, and others on this deal to support marine conservation, in one of the most biodiverse locations on the planet, highlights the impact sustainable finance solutions can have in addressing the funding gap for biodiversity conservation. By mobilizing capital and engaging with different stakeholders, global financial institutions can help drive innovation for ocean preservation and environmental protection,” added Emma Crystal, Chief Sustainability Officer at Credit Suisse.
