Preferred Creditor Status

As a participant in syndicated loans (B-loans), Cordiant shares the advantages that IFIs derive as multilateral development banks. Principal among these is the Preferred Creditor Status (PCS). While not a legal status, PCS is embodied in practice and exists to mitigate transfer and convertibility risk by ensuring that member governments grant preferential access to foreign currency in the event of a foreign exchange crisis.

PCS has consistently been recognised by entities such as bank regulators, the Bank of International Settlement and rating agencies. In return for recognising PCS, member countries benefit from access to IFI financing, longer maturities, attractive financial terms and technical assistance. IFI clients (i.e. the borrowers) are able to convert and transfer their domestic currencies in order to make payments, repay principal, pay dividends, etc. PCS extends to both A-loans and B-loans because the IFI remains the Lender of Record for both. The success of this measure is seen in the exclusion of the IFI financings from past sovereign debt rescheduling and general debt-servicing moratoria.

Owing to PCS and the highly structured nature of the financings, many IFI loans are rated higher than the borrowing country's' foreign currency credit rating.