Landmark transaction, largest Social bond transaction to date in capital markets
The African Development Bank has raised an exceptional US$3billion in a three-year bond to help alleviate the economic and social impacts the COVID-19 pandemic will have on livelihoods and Africa’s economies.
The ‘Fight Covid-19 Social Bond’, with a three-year maturity, garnered interest from central banks and official institutions, bank Treasuries and asset managers including Socially Responsible Investors, with bids exceeding US$4.6billion. This is the largest Social Bond ever launched in international capital markets to date, and the largest US dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75%.
The African Development Bank Group is moving to provide flexible responses aimed at lessening the severe economic and social impacts of this pandemic on its regional member-countries and Africa’s private sector.
“These are critical times for Africa as it addresses the challenges resulting from the coronavirus. The African Development Bank is taking bold measures to support African countries. This US$3billion COVID-19 bond issuance is the first part of our comprehensive response that will soon be announced. This is indeed the largest social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” said Dr. Akinwumi Adesina, President of the African Development Bank Group.
The order book for this record-breaking bond highlights the scale of investor support that the African Development Bank enjoys, said the arrangers.
“As the COVID-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population through financing access to health and all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries – placing strain on already fragile health systems.
It is estimated that the continent will require many billions of dollars to cushion impacts from the disease as many countries scramble contingency measures, including commercial lockdowns, in desperate efforts to contain it. Globally, factories have been closed and workers sent home, disrupting supply chains, trade, travel, and driving many economies toward recession.
Commenting on the landmark transaction, George Sager, Executive Director-SSA Syndicate, Goldman Sachs said: “In a time of unprecedented market volatility, the African Development Bank has been able to brave the capital markets in order to secure invaluable funding to help efforts in the African continent’s fight against Covid-19. Not only that, but in the process delivering its largest-ever US$ benchmark. A truly remarkable outcome in terms of its purpose, but also in terms of a US$ financing”.
The Bank established its Social Bond framework in 2017 and raised the equivalent of US$2billion through issuances denominated in euro and Norwegian krone. In 2018, the Bank was designated by financial markets as the ‘Second-most impressive social or sustainability bond issuer’ at the Global Capital SRI Awards.
“We are thankful for the exceptional level of interest the ‘Fight Covid-19 Social Bond’ has raised across the world, as the African Development Bank moves toward lessening the social and economic impact of the pandemic on a continent already severely constrained. Our Social bond programme enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of people of Africa. This was an exceptional outcome for an exceptional cause,” said Hassatou Diop N’Sele, Treasurer, African Development Bank.
Fight Covid-19 was allocated to central banks and official institutions (53%), bank Treasuries (27%) and asset managers (20%). Final bond distribution statistics were as follows: Europe (37%), Americas (36%), Asia (17%) Africa (8%,) and Middle-East (1%).