2. International Forum on Investment in Private Higher Education IFC The World Bank, January 21 – 23, 2004 “ Moving Beyond The Hypothetical In Financial Structuring” Case Study: Competitive Financing Through Securitization of Future Tuition Payments Horacio Ríos Domic Vice Chancellor, Finance, Administration and Development Diego Portales University, Chile

3. Status before the project   Teaching and Research: 12 undergraduate degrees in a limited number of areas, and a scarce scholarly research and publications program.   Academic Model: traditional, 4 to 6 year undergraduate degree programs lacking easy continuation onto graduate degrees.   Infraestructure: 61,082 mts 2 and a 10 year capital investment plan to accommodate new programs and growing enrollment.   Financing: only long-term borrowing from local banks, engaging mortgage guarantees. No other financing mechanisms (e.g. leasing) were used.   Personnel: 1,364 in 2002 (1,006 faculty and 358 staff).   Enrollment : 9,713 in 2002, 10,750 in 2003.

4. Project objectives   Access enough long-term financing to secure the financial sustainability of an adequate capital investment plan, and thus advance the University’s competitive position within the industry.   Change the way the nation’s universities access financing and report financial statements. Every quarter, UDP must submit financial reports to regulatory agencies and make them publicly available.   Borrowing US$23mm from local banks implied a 10-year timeframe for completion of our infrastructure project.   Lead innovations within the industry.   Secure sound, efficient and transparent financial management.   Early implementation of the capital investment plan will save US$1mm and give place to a consistent corporate identity throughout our facilities.

5. The Process sep-02oct-02nov-02dec-03jan-03feb-03mar-03apr-03may-03 1. UDP´s valuation 1.1. Development of financial model 1.2. Identificaction of possible liabilities 1.3. Selection of tuition and fees cash flows 1.4. Preliminary risk rating by agencies 2. Structuring 2.1. Selection of securitization agency 2.2. Financial modeling of bond 2.3. Risk rating of bond 3. Legal aspects 3.1. Selection of legal counsel 3.2. Writing and revision of legal documents 3.3. Presentation before regulatory and rating agencies 4. IFC 4.1. Analyses and clearances 4.2. Negotiation 5. Marketing Communications 5.1. Communications to market 5.2. Road Show 6. Placement of bond Steps 9 Months

6. Road Show y Bond Placement   In April 2003 we held private one-on-one meetings with prospect investors, where we made presentations about the University and the bond structure.   During the final road show we presented our development strategy, capital investment plan, and the specifics of the bond placement.   The IFC was an active participant along with the securitization agency, and financial and legal advisors.   The placement had a demand 30% higher than its nominal value from institutional investors (retirement funds and insurance companies) and brokerage firms.   Its rate was UF + 5.45%, a spread of 310 basis points over Chile’s treasury bonds with equal maturity.

7. Experience gained and lessons learned   The operation’s success is a function of its results, i.e., despite an improvable process, results were optimal.   Importance of having reliable historic data so as to conduct adequate analyses and the required financial modeling.   Crucial requisite of having a team of highly skilled and committed professionals.   Importance of incorporating a strategic partner such as the IFC, which contributes not only its guarantee but also its world-wide knowledge of the education sector.

8. Securitization of future cash flows - Concepts ORIGINATOR UDP ORIGINATOR UDP Students/Debtors Securitization Agencies Trust Securitization Agencies Trust Services $ Investors CollectionBond Sale of Flows Price of Flows Obligation pàyment Payment of Ceded Flows Administrator Collectors Administrator Collectors Payment of Ceded Flows

9. Bond Structure – Cascade Mechanism Guarantee Reserve Covenants Reserve Flows -G- I- K Acceleration Reserve Principal Fund Flows-G- I Interest Fund Flows -G UDP Originator ABN AMRO Securitization Agency Separate Purpose Equity Collection Flows Collection Account Flows-G-I-K-Reserves Selected Schools Tuition and Fees from: Law Journalism Advertising Design Anual expected flow IFC UDP Receivable Accounts Guarantee

10. History and Outlook