The African Development Bank (AfDB), rated Aaa/AAA/AAA/AAA (Moody’s/S&P/Fitch/Japan Credit Rating, all stable), has launched and priced a $2.75 billion 5-year Global Benchmark bond due July 22, 2026, its second of the year.
With this latest issue, the African Development Bank continues to carry out its funding strategy of issuing large liquid benchmark transactions and adds another on-the-run reference in the 5-year maturity while extending the Bank’s outstanding USD curve.
Meanwhile, the Bank set the size of the transaction at $2.75 billion even though the final order book closed in excess of $4.2 billion with 82 investors participating. As expected, the issue garnered interest from top-quality investors, with particularly good demand from central banks and official institutions.
The Bank’s mandate for a 5-year USD Global Benchmark was announced on Wednesday July 14, 2021 at 1.00pm London time with Initial Pricing Thoughts (“IPTs”) released at mid-swaps +3 basis points (bps) area.
Strong investor interest
The transaction was met with strong interest from the outset and resulted in record Indications of Interest (“IOIs”), in excess of $2.9 billion, by the time books opened on Thursday at 8.00am London time. This allowed the Bank to tighten guidance by 1bp to mid-swaps +2bps area.
According to the Africa Development Bank, demand for the bond continued to grow during the European morning and late Asian session, with investor interest exceeding $3.9 billion by 10.50am London time, allowing the Bank to further tighten and set the spread at mid-swaps +1bp.
Moreover, the high quality of the order book and limited price sensitivity allowed the Bank to tighten the pricing by 2bps throughout the execution process and achieve the tightest spread vs US Treasuries from a 5-year supranational or agency in 2021.
Hassatou Diop N’Sele, Group Treasurer of the African Development Bank indicated that the bank was pleased with the patronage of the bond and more especially with the quality of investors participating.
“We are pleased with the outcome of this global benchmark, particularly the strong and still-growing interest from high-quality investors. This is one of two bonds from the supranational, sovereign and agencies asset class that was priced below US Treasuries + 10 bps in the 5-year maturity, clearly an achievement that will benefit our regional member countries”.
Investor distribution statistics
The transaction is yet another demonstration of the African Development Bank’s extremely broad and high-quality investor base, with this bond well allocated across different geographies and investor types.
Majority of the investors (51%) come from the Americas, 34% from the EMEA, whilst 15% come from Asia. Meanwhile, 34% of the investors expressing interest in the bond are banks.
The Lead Managers include Bank of America, Citi, Deutsche Bank, Nomura and Wells Fargo Securities. Castle Oak Securities has been selected as Co-Lead Manager. Moreover, the bond will attract a Re-offer price of 99.93% and a Re-offer yield of 0.888% semi-annually. The coupon price is 0.875% semi-annul, 30/360, unadjusted.
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