Written by Karin Strohecker and Rachel Savage
LONDON/JOHANNESBURG (Reuters) – The African Development Bank (AfDB) has sold a long-awaited hybrid capital note, the multilateral development bank's first loan as it comes under increasing pressure to find ways to increase lending.
The G20 group of major economies urges multilateral financial institutions to consider hybrid financing structures, maximize balance sheets and increase funding to support developing economies facing crises such as climate change. ing.
The $750 million perpetual hybrid note carries an interest rate of 5.75%, which is more stringent than guidance of 6.375%. The highly subordinated, debt-like equity instrument has a lower credit rating than a lender's AAA-rated debt, and investors can redeem it after 10.5 years or every five years thereafter.
“This is not a one-time deal. It is definitely one of many in the future,” said Hassatou Nsere, AfDB Group's vice president of finance and chief financial officer. He did not provide details about the plan.
“We are establishing hybrid capital issued by AAA-rated multilateral development banks as a new asset class…Other MDBs have also expressed interest in considering hybrid capital.”
After an investor roadshow in September, the AfDB postponed the launch due to rising borrowing costs and volatile markets.
BNP Paribas and Goldman Sachs structured and arranged the issue, with Barclays and BofA Securities participating as bookrunners. S&P Global rates the bond AA-minus.
Damien Saunders of BNP Paribas' FIG syndicate said the deal attracted a wide range of investors, from private banks to asset managers and specialist credit funds.
“It's obviously been a big learning curve for everyone involved, including on the investor side. Investors had to go away and decide how they were going to price this risk,” Sanders said. he said.
The Bank's acting finance chief told Reuters in November that the bank has the capacity to issue $4 billion to $5 billion of hybrid capital debt, but would be “progressive” with one or two deals a year. .
The terms of the hybrid bond allow for permanent principal impairment and the option to omit coupon payments if the Bank faces stress and requires shareholders to raise capital.
(Reporting by Karin Strohecker and Rachel Savage; Additional reporting by Rodrigo Campos; Editing by Marguerita Choy)
