African Development Bank (AFDB) has launched a $3 billion “Fight COVID-19” Social Bond, the largest USD social bond transaction ever recorded in the capital market.
The Fight COVID-19 Social bond, which is expected to mature in three years, has raised funds that will be channelled into alleviating the economic and social impact of the Coronavirus on the African continent.
The record-breaking bond attracted bids exceeding $4.6 billion, with strong interest from the central banks, financial institutions, investors and assets managers.
According to the official statement from the bank, it is “the largest dollar-denominated 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%”.
Dr Akinwumi Adesina, President of the AfDB Group said that the bank was moving towards providing flexible responses to help the African economy recover from the pandemic.
“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 $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced.
“This is indeed the largest dollar social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” Adesina said.
Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB stated that record-breaking bonds would turn around the economic downturn.
Claquin said that the bank was living up to its responsibilities of helping the African economy, by helping Africans access health and other financial goods and services. He noted that even though the virus was slow to get to South Africa, it was already placing pressure on the health systems.
According to him, factories had been closed and some workers laid off, travel restrictions had been placed and supply chains disrupted – a situation that could drive the continent into recession if nothing was done.
Speaking about the bond, Treasurer, African Development Bank, Hassatou Diop N’Sele noted that the bank’s move will greatly lessen the economic impact of the pandemic on Africa.
“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 towards lessening the social and economic impact of the pandemic on a continent already severely constrained.
“Our Social bond program enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of the people of Africa,” she said.
George Sager, Executive Director, SSA Syndicate, Goldman Sachs said that the transaction was a remarkable outcome “both in terms of its purpose but also in terms of a USD financing”, and commended the bank for bracing the capital markets at an uncertain time like this.
The Fight COVID-19 funds have been allocated to beneficiary institutions.
Central banks and official institutions get 53%, bank treasuries receive 27% and asset managers get 20%.
Final bond distribution statistics were as follows: Europe (37%), Americas (36%), Asia (17%) Africa (8%,) and Middle-East (1%).
The bank established its Social Bond framework in 2017 and raised the equivalent of $2 billion through issuances denominated in Euro and Norwegian krone. In 2018 the Bank was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.