Maturity BasedPricingBased Pricing

Maturity-Based Pricing

Sovereign and SovereignGuaranteed Borrowers

Key Concepts and Examples

Calculating Average Loan Maturity and Associated Maturity Premium

This document provides general information on maturity-based pricing and related concepts, such as Average Loan Maturity

Introduction

ADB's Board of Directors approved the introduction of maturity-based pricing for LIBOR-based loans (LBL) to sovereign borrowers or with sovereign guarantees, and local currency loans with sovereign guarantees on 14 December 2011.

A maturity premium will be applicable to loans for which formal loan negotiations are completed on or after 1 April 2012.

Average loan maturity is an important element under maturity-based pricing.

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Maturity Premium

(Sovereign and sovereign-guaranteed borrowers)

? The average loan maturity will determine how much maturity premium is applied on the loan.

Average Loan Maturity

Maturity Premiuma

Less than or equal to 13 years Greater than 13 years and up to 16 years Greater than 16 years and up to 19 years

Nil 0.10% per annum 0.20% per annum

? Maturity premium is applicable to loans for which formal loan negotiations are completed on or after 1 April 2012.

? The average loan maturity is subject to a limit of 19 years.

a To be applied for the entire life of the loan

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Average Loan Maturity

Average loan maturity is the weighted average time to repay a loan. It considers, both, repayment dates and amounts to provide a better estimation of how quickly a loan is repaid. Repayment dates depend on the first principal payment date, grace period and loan term. Repayment amounts depend on repayment method selected.

Choice of key repayment terms, such as Grace Period, Loan Term and Repayment Method are important considerations, given their effect on Average Loan Maturity.

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Average Loan Maturity - Calculation

Average loan maturity is calculated as the average of the number of years until each principal repayment amount is due, weighted by the principal repayment amount. Average Loan Maturity = Sum of Weighted Repayments Sum of Total Repayments

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