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Immunization Bond Gives Investors a Chance to Save Lives

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November 7, 2006—Each year, nearly 30 million infants born in developing countries aren’t immunized against preventable diseases. More than 2 million die.

Starting today, investors can help reverse this trend by investing in highly rated bonds backed by six governments that will get immunization funds to developing countries more quickly than would otherwise be possible, say proponents including the UK government and the World Bank.

By raising US$4 billion over the next 10 years, the International Finance Facility for Immunisation (IFFIm) hopes to fund immunizations for 500 million children—and thereby save an estimated 10 million lives.

The first US$1 billion IFFIm bond issue was launched Monday in the international capital markets. UK Chancellor of the Exchequer Gordon Brown, joined by religious leaders, and celebrities, hailed the plan today as “a step on the road to eliminating some of the worst diseases of centuries."

The AAA-rated bonds, backed by mostly AAA-rated governments, have prompted “a buzz” among investors seeking a virtually zero-risk investment that also saves lives, says Susan McAdams, who led the World Bank team that spent almost three years preparing the benchmark bond issuance.

Among the first buyers: the Pope, the Archbishop of Canterbury, and three other British religious leaders at IFFIm’s launch event today in London.

Notes were also placed with North American investors (35 percent), UK investors (12 percent), Swiss investors (8 percent) and investors in the rest of Europe (21 percent). The remainder was placed with investors in the Middle East and Asia, according to IFFIm, the World Bank, Goldman Sachs and Deutsche Bank; the latter two lead-managed the inaugural bond issue.

Investors were central banks and official institutions (35 percent), fund managers (25 percent), pension funds (23 percent), retail investors (8 percent), banks (6 percent), and corporations and insurance companies.

The bond was 1.75 times oversubscribed with an average order size of US$32 million from 54 investors in 15 different countries (orders ranged from US$1,000 to $250 million).

“We are pleased that IFFIm could establish itself so successfully among its peer group of multilateral development institutions,” says Doris Herrera-Pol, head of Capital Markets at the World Bank.

“Investors ranged from large institutional investors common to similar transactions for supranationals, to investors interested mainly in IFFIm due to its purpose of financing grants for health and immunization projects in developing countries.”

IFFIm is a new international development institution and UK charity affiliated with the global health partnership GAVI Alliance, which funds immunizations and other health efforts in 70 of the world’s poorest countries.

Funds raised through IFFIm bond issues will be used for GAVI immunization programs over the next 10 years, including GAVI’s measles and tetanus vaccine campaigns. The funds will also help create a polio vaccine stockpile to protect against future outbreaks, fund new and under-used vaccines, such as vaccines for Hepatitis B, yellow fever and HIB, and help countries strengthen immunization services.

The financing plan accelerates donor contributions to immunization programs and helps lock in aid flows, which usually depend on annual budgets, says McAdams.

The money will be raised in the capital markets over 10 years, but the bonds will be repaid over 20 years by the UK, France, Italy, Spain, Sweden and Norway under the terms of legally binding agreements.

It’s a good way to fund immunization programs because the benefits—lives saved—are realized more quickly as future donor contributions are used to provide funding now, she says.

And, “it gives the governments a way to fulfill their political commitments to increase aid,” she adds.

World Bank Senior Health Specialist Amie Batson, who leads the Bank’s immunization team, expects the “impact of these investments will be felt by generations of children who will now be reached and protected against an array of childhood killers.

“By assuring stable, predictable and coordinated cash flows, IFFIm funds will help governments reach the nearly 30 million children that miss being immunized each year - a failure that results in over 2 million preventable deaths annually,” she says

The World Bank Group’s International Bank for Reconstruction and Development is serving as IFFIm’s Treasury Manager, overseeing donor payment tracking, accounting and reporting, asset and liability management, among other duties.

IFFIm will disburse grants from its operating fund to finance GAVI, a public-private partnership that was created in 2000 to reverse declining immunization rates in developing countries.

The GAVI Alliance includes the Bill & Melinda Gates Foundation, developing and industrialized country governments, developing and industrialized country vaccine industry, non-governmental organizations, research and technical health industries, UNICEF, the World Health Organization, and the World Bank Group.

GAVI provides multi-year grants to more than 70 of the world’s poorest countries based on a “rigorous” application process in which country proposals are reviewed by a panel of independent experts, according to GAVI.

To apply for funds, governments collaborate with other governmental and aid agencies, such as UNICEF or WHO, that monitor and deliver vaccines. Countries must meet agreed-upon immunization targets to continue to receive funding, says GAVI.

GAVI says its efforts have so far prevented more than 1.7 million premature deaths from vaccine-preventable diseases.




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