The African Development Bank (AfDB), rated Aaa (Moody’s) / AAA (S&P) / AAA (Fitch) / AAA (Japan Credit Rating), has launched and priced a new USD 2 billion 5-year Social Benchmark transaction due 18 September 2029, coinciding with the 60th anniversary of the founding of the AfDB. The bond was launched on Tuesday 10 September and pays a coupon of 3.500% with a re-offer yield of 3.574% and a reoffer price of 99.664%.
The new 5-year USD transaction, issued in a social bond format under the Bank’s Sustainable Bond framework, marks AfDB’s second USD Global Benchmark in 2024 following the 3-year USD 2 billion social benchmark transaction issued in January.
The new transaction brings an on-the-run reference point in the 5-year part of the USD curve, extending AfDB’s outstanding curve, and demonstrating the issuer’s commitment to maintain liquid lines at key benchmark maturities. With the final order book closing in excess of USD 3.7 billion (including USD 150 million of Joint Lead Managers (JLMs) interest), and 66 investors participating, the success of this 5-year transaction is a clear vote of confidence from investors in AfDB’s AAA credit. The strong participation from ESG investors representing 25% of the final order book also highlights investors’ confidence in the Bank’s Sustainable Bond Framework and development mandate.
The African Development Bank’s mandate for a new 5-year USD Social Benchmark was announced on Monday 9th September 2024 at 09:40 UKT. Initial Pricing Thoughts (IPTs) were released thereafter at 12:53 UKT at SOFR Midswaps + 42 basis points (bps) area.
Investor demand was strong from the outset as Indications of Interest (IoIs) from AfDB’s high quality investor base accumulated at a rapid pace, exceeding USD 2.5 billion (including USD 150 million JLM interest) overnight. Books officially opened the following morning, on Tuesday 10th September at 8:01 UKT, with price guidance tightening by 1bp to SOFR Midswaps + 41bps area.
The order book continued to grow throughout the morning, with investor demand approaching USD 3.3 billion (including USD 150 million JLM interest) by 10:19 UKT, and the issuer set the spread at SOFR Midswaps + 41bps.
At 13:52 UKT, the quality of the order book allowed the issuer to set the size at USD 2 billion, as the final order book closed in excess of USD 3.7 billion (including USD 150 million JLM interest). At 15:58 UKT, the transaction officially priced at SOFR Midswaps + 41bps, equivalent to a reoffer yield of 3.574% and a spread of 11.27bps vs the on-the-run 5-year US Treasury (UST 3.625% Aug-29).
Investor distribution statistics
The geographical distribution highlights a diversified investor base with Americas (47%), followed by Europe, Middle East and Africa (EMEA) (32%) and Asia (21%).
In terms of investor type, the high-quality order book was predominantly allocated to Central Banks & Official Institutions (56%), Bank Treasuries (29%) and Fund Managers/Asset Managers/Hedge Funds (15%).
Bond Summary Terms
Issuer:
African Development Bank (“AfDB”)
Issuer rating:
Aaa / AAA / AAA (Moody’s / S&P / Fitch)
Amount:
USD 2 billion
Pricing date:
10 September 2024
Settlement date:
18 September 2024 (T+6)
Coupon:
3.500%, Fixed, semi-annual 30/360
Maturity date:
18 September 2029
Re-offer price:
99.664%
Re-offer yield:
3.574% annual
Re-offer spread:
SOFR MS + 41bps / UST 3.625% Aug-29 + 11.27bps
Joint Lead-Managers:
BofA Securities, BMO Capital Markets, Citi, Goldman Sachs International and Morgan Stanley
ISIN:
US00828EFD67
Source: Edmond Otu Yeboah