Morgan Stanley on Thursday sold a $110 million collateralized loan obligation that will help finance small businesses in developing economies from Nicaraguan potters to Peruvian shopkeepers.
About 21 banks, hedge funds, insurance companies, money managers, and mutual funds bought the notes, Morgan Stanley said.
Morgan Stanley and the microfinance asset manager BlueOrchard Finance SA in Geneva, widened the number of institutions that could invest in small loans to the developing world by structuring the CLO to get an investment-grade credit rating, putting it on a par with debt sold by Wal-Mart Stores Inc. and the drugmaker Eli Lilly & Co.
"The rating enabled a far greater range of institutions to participate," Ellen Brunsberg, who heads the European securitized products group at Morgan Stanley in London, said in an e-mail.
"This interest can only be good for the future expansion of microfinance."
The deal is the second microfinance CLO that Morgan Stanley and BlueOrchard have sold, following an unrated deal last year.
It is the latest development for a microfinancing industry pioneered by Muhammad Yunus, who won last year's Nobel Peace Prize for his work in lending to the poor in Bangladesh.
Roughly 86% of the securities were sold in Europe, and the remainder were bought by U.S. investors, Morgan Stanley said. The notes were sold through BOLD 2, a company set up to issue the securities.
The underlying loans are to 20 microfinance institutions in Azerbaijan, Bosnia, Cambodia, Colombia, Georgia, Ghana, Kenya, Mongolia, Montenegro, Nicaragua, Peru, Russia and Serbia. Most of the loans are made in local currency.
Microfinance borrowers include Aura Rosa Andino, 50, who owns a craft shop selling pottery in the Mercado Central of Managua, Nicaragua, Morgan Stanley said.
Her first loan, of $3,600, enabled her to buy products from local craftsmen and hire two employees.
Three more microfinance CLOs will be sold this year, according to S&P.
Annual sales of the securities could reach as much as $4 billion in coming years, said Ian Callaghan, the head of microfinance at Morgan Stanley, in an interivew this month.
