African Development Bank Group’s Board Approves 2015 Borrowing Program
The Board of Directors of the African Development Bank, on Wednesday, December 10, 2014, held its regular meeting in Abidjan and approved the institution’s 2015 Borrowing Program, for a cumulative amount of UA 4.507 billion (US $6.6 billion), including up to UA 205 million (US $300.17 million) for possible draw down under the loan component of the Enhanced Private Sector Assistance (EPSA) Initiative.
The Bank’s borrowing program aims to ensure that the institution has sufficient liquidity to meet its cash flow requirements consistent with the liquidity policy. It would also help provide cost-effective resources to the Bank’s regional member countries, while further diversifying its investor base.
The Board also authorized an increase of the 2014 Borrowing Program to enable the Bank to take advantage of any suitable funding opportunities that may emerge between the date of approval and 31 December 2014; provided that the 2015 Borrowing Program will be reduced by an amount equivalent to any borrowings executed in 2014 in excess of the amount authorized under the 2014 Borrowing Program.
Speaking on the occasion, the Bank’s Treasurer, Pierre Van Peteghem, underscored that the institution’s rating remains the key determinant of the cost at which funding can be mobilized in the financial markets.
“The credit rating agencies Fitch, Japan Credit Rating Agency, Moody’s, and Standard & Poor’s have all assigned a triple-A rating to the Bank’s long term senior debt, and a double A-plus rating to its subordinated debt for the past eleven years,” Van Peteghem said. “Moody’s, for example, sees the Bank’s intrinsic financial strength as ‘very high’ whilst Standard & Poor’s rates the Bank’s stand-alone credit profile (SACP) as strong at ‘AA’”.
Van Peteghem further added that “A regular dialogue with banks and investors will remain an essential pillar of the Bank’s funding strategy. It is indeed of paramount importance that the Bank continues to proactively deepen and broaden its investor base and provide updates of its financial strength and shareholder support”.
It should be recalled that the 2014 Borrowing Program was approved by the Board of Directors on December 4, 2013 for a maximum amount of UA 3,188 million (US $4,668 million) including up to UA 130 million (US $190.35 million) under the EPSA Initiative. On July 7, 2014, the Board approved an increase in the 2014 Borrowing Program to UA 3,258 million (US $4,770.49 million) in order to allow for a UA 200 million (US $292.85 million) drawdown under the EPSA Initiative. As of September 30, 2014, the Bank has raised UA 2,948 million (US $4,316.58 million) from the capital markets.
The funding activities in the current year have helped to consolidate the Bank’s cost-effectiveness and also narrow the spread differential with peers. The US dollar global benchmark program is the pillar of this strategy and provides the foundation for issuance in other domestic markets as well as private placements and uridashi1 transactions that provide funding at competitive levels.
The Bank has maintained continued access to a wide array of capital markets across the globe. As of 30th September 2014, a total of UA 2,948 million had been raised in the capital markets (96% of the approved amount) through a variety of markets, currencies, and instruments. Notably, the Bank issued two new USD 1 billion dollar global transactions in 3-years and 7-years, in line with its commitment to continue to develop access to public markets and building name recognition. It also issued its maiden transactions in Swedish krona through the green bond market, and continued to build its curve in Australian dollars while returning to both the Sterling and New Zealand dollar markets after a long absence. The year saw as well the Bank issue its inaugural Naira bond in the domestic market of Nigeria. It should be highlighted that Standard & Poor’s this year cited the Bank’s diversified wholesale funding profile as strength and an important rating factor.