In a historic move, the African Development Bank, boasting a stellar credit rating of Aaa/AAA/AAA/AAA (Moody’s/S&P/Fitch/Japan Credit Rating, all stable), has successfully launched and priced its first-ever Sustainable US dollar-denominated 750 million perpetual subordinated hybrid capital notes.
On January 30, 2024, the African Development Bank executed a hybrid capital transaction featuring a coupon rate of 5.75% until August 2034, with a 10.5-year first call date at the discretion of the Bank. The issuance garnered widespread attention and support, with a robust order book exceeding USD 6 billion and attracting over 275 investors. Ultimately, more than 190 investors were allocated shares, emphasizing the strong demand for the bank’s landmark offering.
Hedge and specialized funds secured the lion’s share of the allocation at 54.8%, followed by Asset Managers at 27.8%, Central Banks and Official Institutions at 6.7%, and Pension Funds/Insurance and Banks/Private Banks at 6.6% and 4.1%, respectively. Geographically, demand was most prominent in the UK, accounting for 51.1%, followed by EMEA at 26.5%, Asia at 14%, and the Americas at 8.4%.
This groundbreaking issuance signifies the African Development Bank’s pioneering role in optimizing its balance sheet in alignment with the G20 Capital Adequacy Framework (CAF) recommendations, aimed at bolstering lending capacity. The innovative use of hybrid capital enhances the bank’s sustainable lending capacity, emphasizing its commitment to addressing the pressing challenges faced by Africa and the developing world.
The issuance was led by Joint Structuring Agents BNP Paribas and Goldman Sachs International, with Barclays, BNP Paris, BofA Securities, and Goldman Sachs International serving as Joint Bookrunners for the Perpetual Non-call (PerpNC) 10.5-year inaugural USD Global SEC-exempt Sustainable Hybrid transaction.
Hassatou N’Sele, Vice President for Finance and Chief Financial Officer of the African Development Bank, highlighted the marked enthusiasm from a diverse range of investors. She emphasized that this landmark transaction sets the stage for AAA-rated Multilateral Development Banks to enhance their capital base, ultimately increasing support to regions grappling with crises and long-term development challenges.
Omar Sefiani, Bank Group Treasurer, expressed pride in the record-breaking interest from over 275 investors, underlining the success as a testament to the African Development Bank’s ability to tap into the private investor market and supplement its capital base for incremental sustainable lending.
African Development Bank Celebrates a Decade of ESG Bond Issuances
Monday’s milestone transaction also marks a decade of bond issuance in the Environmental, Social, and Governance (ESG) space for the African Development Bank. The notes, issued in a Sustainable Bond format under the Bank’s 2023 Sustainable Bond Framework, will be leveraged through new green or social bonds. This addition to the capital base will facilitate additional lending capacity for environmental and/or social projects.
The Sustainable Bond Program, established in 2023, combines and updates the previous Green Bond Program and Social Bond Program, allowing the issuance of green bonds, social bonds, and sustainability bonds. These ESG bonds play a crucial role in the fight against climate change and contribute to socio-economic development in the Bank’s Regional Member Countries.
In a previous landmark, the African Development Bank issued its inaugural green bond in 2013, listed on the Luxembourg Stock Exchange (LuxSE), and has been issuing social bonds since 2017. The recent launch and pricing of a USD 2 billion 3-year Social Global Benchmark on January 22, 2024, further solidify the Bank’s commitment to sustainability, consolidating and enhancing its existing Green and Social Bond programs under the new Sustainable Bond Framework established in September 2023.
By Delino Gayweh
Serrari Financial Analyst
February 1, 2023
