AfDB’s sustainable hybrid capital order book hits $6 billion

African Development Bank Group (AfDB)

UK leads with 51 per cent allocation

The African Development Bank (AfDB) has successfully launched and priced its first sustainable dollar-denominated 750 million perpetual subordinated hybrid capital notes.

The transaction, sealed on 30 January, was launched with a coupon of 5.75 per cent until August 2034, with a 10.5-year first-call date, at AfDB’s discretion, the bank said in a statement.

The bank achieved a top quality and granular order book with over 275 investors while over 190 were allocated. Investor demand remained upbeat with a peak order book of over $6 billion.

The largest share of the allocation was taken up by hedge/specialized funds (54.8 per cent), followed by asset managers (27.8 per cent). Central banks and official institutions took 6.7 per cent while pension funds/insurance had 6.6 per cent.

Demand came mainly from the United Kingdom (51.1 per cent) followed by Europe, the Middle East and Africa at 26.5 per cent, Asia (14 per cent) and America (8.4 per cent).

It was the first such bond issuance by a multilateral development bank, giving AfDB a pioneering role in optimizing its balance sheet in line with the G20 Capital Adequacy Framework (CAF) recommendations to boost lending capacity. Hybrid capital is an innovative form of capital, which increases sustainable lending capacity.

The bank mandated BNP Paribas and Goldman Sachs International as joint structuring agents and Barclays, BNP Paris, BofA Securities and Goldman Sachs International as joint book runners to lead and manage its new perpetual non-call (PerpNC) 10.5-year inaugural USD Global SEC-exempt sustainable hybrid transaction.

Monday’s transaction marked a decade of bond issuances in the environmental, social and governance (ESG) space of the pan-African lender. The notes will be issued in a sustainable bond format, under the bank’s 2023 Sustainable Bond Framework and will be leveraged through new green or social bonds.

As a new component of the AfDB’s capital base, the sustainable hybrid capital will allow additional lending capacity to fund environmental and/or social projects.

In 2013 the regional bank issued its inaugural green bond, listed on the Luxembourg Stock Exchange (LuxSE). It has been issuing social bonds since 2017.