The African Development Bank issues EUR 1.25 billion 0.875% 10-year Social Bond due 24 May 2028
On Wednesday, 16th May 2018, the African Development Bank (“AfDB”), rated Aaa/AAA/AAA by Moody’s / S&P / Fitch (with stable outlook) successfully priced a EUR 1.25 billion 10-year Social Bond transaction.
The transaction, which follows the inaugural EUR 500 million 7-year Social Bond issued in November 2017, was priced at mid-swaps (MS) minus 8 basis points (bps), 2 bps inside Initial Pricing Thoughts (IPTs). This equated at the time of pricing to a spread of 36.7 bps over the German Bund DBR 0 ½ 15/02/28.
The transaction is a testament to AfDB’s established positioning in the Euro market, representing its largest EUR benchmark ever. The benchmark also extends AfDB’s EUR curve by a further two years, providing a new liquid reference point in the 10-year tenor.
By issuing Social Bonds to finance socio-economic development in its Regional Member Countries, the AfDB is advancing its mission and strategy – to spur sustainable economic development and social progress in Africa – and is capitalizing on its strong track-record of financing projects with strong social impact on the continent. The eligible projects to be financed with the proceeds of Social Bonds are expected to lead to poverty reduction and job creation, as well as inclusive growth across age, gender and geography, thus improving the quality of life for the people of Africa.
The transaction was announced on Tuesday 15th May 2018 at 1:20pm London time with IPTs of MS – 6 bps area. Books officially opened at 8:15am London time on Wednesday 16th May 2018, and price guidance of MS – 6 bps area was simultaneously released. The issue drew investors’ interest from the opening with the order book exceeding EUR 1 billion (excluding Joint-Lead Managers’ (JLM) interest) within one hour.
Momentum continued to build and the book size exceeded EUR 1.4 billion (excluding JLM interest) by 10:00am London time, at which point guidance was revised tighter to MS – 7 bps. By 10:50am London time, the book had grown to over EUR 1.6 billion (excluding JLM interest) and the Bank set the spread at MS – 8 bps, one basis point tighter, whilst simultaneously announcing closure of books at 11:15am London time.
Final books were in excess of EUR 1.7 billion (excluding JLM interest) at closing, and given the very high quality order book, the transaction was launched shortly thereafter with an issue size of EUR 1.25 billion, upsized from the initially targeted EUR 1 billion.
The 10-year Social Bond transaction from the African Development Bank was priced just after 3:30pm London time, with a spread of MS – 8 bps, 2 bps tighter than IPTs. This equated to a spread of 36.7 bps over the German Government Bond DBR 0 ½ 15/02/28 at the time of pricing, representing a negative new issue premium to secondary levels.
The final order book, which was globally well diversified, saw over 50 different accounts participating. Asset Managers took the largest share of allocations with 38%, followed by Central Banks and Official Institutions with 34% and bank treasuries at 28%. By geography, French investors were allocated 41%, followed by strong participation from Asian accounts (15%), Benelux (14%) and the Americas (11%), with the remaining amount allocated to other Europe, Middle-East and African countries.
“We were thrilled with the success of our second Social Bond transaction since we launched our program back in September 2017. This is the largest Euro benchmark we ever issued, highlighting the strong interest from the market in our Social Bond Program and our corporate mission, which is to combat poverty and spur sustainable economic and social development in Africa. We are extremely pleased with the outcome of this transaction, as we were able to extend our Euro curve, thanks to the support of a very high quality group of investors, at a price reflective of the quality and rarity of AfDB Euro bonds. On the back of this success, we will continue to remain engaged with, and supportive of the Social Bond market.”
Hassatou N’Sele, Treasurer and Acting Vice-President Finance
Issuer: African Development Bank (AfDB)
Rating: Aaa (Moody’s) / AAA (S&P) / AAA (Fitch)
Issue amount: EUR 1.25 billion
Pricing date: 16 May 2018
Settlement Date: 24 May 2018
Coupon: 0.875%, Annual, ACT/ACT
Maturity: 24 May 2028
Re-offer Price: 98.938%
Re-offer Yield: 0.987%
Re-offer vs. Mid-Swaps: - 8 bps
Re-offer vs Benchmark: DBR 0 ½ 15/02/28 + 36.7 bps
Lead Managers: Credit Agricole CIB, Goldman Sachs International, Natixis and Societe Generale CIB