Final terms of the transaction
Issuer
African Development Bank
Ratings
Aaa / AAA / AAA (Moody's / S&P / Fitch)
Principal Amount
EUR 500,000,000
Pricing Date
14 November 2017
Settlement Date
21 November 2017
Maturity Date
21 November 2024
Re-Offer Price/Yield
99.282% / 0.354% annual
Coupon
0.25% annually, Act/Act (ICMA), following unadjusted
Spread vs. MS
-14 bps
Spread vs. DBR 1% Aug 2024
+41.4bps
Denominations
EUR 1,000 or any integral multiple
Documentation
Issuer's Global Debt Issuance Facility
Listing
Luxembourg Stock Exchange (Regulated Market)
ISIN
XS1720947081
Joint Bookrunners
Credit Agricole CIB, Goldman Sachs International, HSBC
Context of the transaction
On Tuesday 14th November 2017, the African Development Bank rated Aaa / AAA / AAA by Moody's / S&P / Fitch (all stable) successfully priced a EUR 500 million 7-year inaugural Social Bond transaction, following a European roadshow to present its newly established Social Bond framework. The issue, three times oversubscribed within three hours from formal book opening, was priced at MS-14bps, 2 bps inside of initial guidance. This equated at the time of pricing to a spread of 41.4bps over the DBR 1.00% Aug 2024.
By issuing Social Bonds to finance socio-economic development in its Regional Member Countries, 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 executing social investments in the continent. The projects selected to be financed through its Social Bond issues are expected to lead to significant poverty reduction, job creation, as well as inclusive growth across age, gender and geography. The projects are selected for their strong social outcomes and are aligned with the Bank's Ten-Year Strategy and its operational priorities, the High 5s, which include "Improving the quality of life for the people of Africa".
Launch and execution process
The transaction was announced on Monday 13th November 2017 at noon London time, with Initial Pricing Thoughts for the EUR 7-year Social Bond being released in the mid-swaps (MS) minus "low teens" area. Strong interest from real money accounts and Central Banks started flowing into the books from the outset, with indications of interest exceeding EUR 300 million (excluding JLM interest) by London close.
Books officially opened at 8am London time on Tuesday 14th November 2017 for a EUR 500 million 7-year benchmark transaction, with price guidance of MS-12bps area. Momentum continued into the London morning with the book growing above EUR 900 million (excluding JLM interest) by 9am London time, at which point guidance was revised tighter to MS-13bps area.
Books officially closed at 10.30am London time, in excess of EUR 1.55 billion (excluding JLM interest), and soon after the transaction was launched with a EUR 500 million size with price being set one basis point tighter at MS-14bps.
The inaugural EUR 500million 7-year Social Bond issue from the African Development Bank was priced just before 4pm London time, with a spread of MS-14bps, 2 bps tighter than initial guidance. This equated to a spread over the DBR 1.00% Aug 2024 of 41.4bps at the time of pricing, with no new issue premium concession.
There was very strong support for the transaction, in particular from those investors who integrate social and environmental considerations in their investment strategy. This is reflective of the relevance of the Bank's social mandate and the solidity of its new Social Bond framework. The final book saw 69 different accounts, of which 19 were new to the issuer.
By investor type, Central Banks and Official Institutions took the lead with 50.9%, followed by Bank Treasuries with 22.2%, Asset Managers with 15.8%, Pension funds and Insurers took 10.8%, with the remaining 0.3% going to others. By geography, Asia took 19.1%, followed by Germany with 15.3%, Benelux with 15.2%, Nordics with 14.8%, France with 12.0% and the United Kingdom with 8.3%. The remaining 15.3% went to the rest of EMEA.
"This is a fantastic outcome, three-time oversubscription in 150 minutes. We are delighted by the responses from socially responsible investors and the enthusiastic response to the African Development Bank Social Bond mandate and framework. Improving the quality of life for the people of Africa is one of our High 5 priorities. And we know that the High 5s, intrinsically linked to the African Union's Agenda 2063, will help Africa achieve close to 90% of the United Nation's Sustainable Development Goals (SDGs)."
Hassatou N'Sele, Treasurer, African Development Bank
"Crédit Agricole CIB is very proud to have accompanied the African Development Bank for this inaugural Social Bond. African Development Bank's Social Bond Framework is aligned with the 5 priority pillars "the High 5s" defined by the bank in the context of its 10-year strategy to reach inclusive growth, gradually transition to green growth and contribute to the continent's efforts in achieving the United Nation's Sustainable Development Goals. African Development Bank now belongs to the few issuers which have both a Green Bond and a Social Bond program. This is excellent news for the development of these markets."
Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
"A spectacular début in the social market for the African Development Bank. A transaction that can be considered a success by any parameter. First and foremost by the impressive SRI investor participation but also by the robust order book size and quality of the investors who participated. A tremendous outcome and one that sets the issuer well on their way for future issuance in social format."
Lars Humble, Head of SSA Syndicate, Goldman Sachs.
"It's great to see the African development Bank expanding their presence in the sustainability market from Green Bond issuance into Social bonds with this inaugural deal. The overwhelming investor response demonstrates the mobilisation of capital towards social investments, a trend that we have seen accelerating throughout the year. Within this rapidly developing market the opportunity to contribute to development in Africa has been a key factor underlying the over-subscription of the deal and the impressive final pricing."
PJ Bye, MD, Head of SSA Syndicate, HSBC.
"Mirova welcomes African Development Bank's Social Bond. This transaction has been very well prepared, with an extensive roadshow and an open dialogue with investors, and very nicely executed. We invite other issuers to develop similar Social Bond frameworks. This market can contribute to channeling more funds to a more sustainable economy and Mirova will support it".
Marc Briand, Head of Fixed Income, Mirova.
"We welcome African Development Bank issuance of a social bond as it offers possibilities of allocating capital into good use and at the same time generating good return. Social bonds address a wider spectrum of social issues, sourcing investment projects for solutions or to mitigate social effects."
Lars Lindblom, Fixed Income Portfolio Manager, AP2.
Distribution stats
Investor Type
Geography
Central Banks & Official Institutions
50.9%
Asia
19.1%
Banks
22.2%
Germany
15.3%
Asset Managers
15.8%
Benelux
15.2%
Pension funds & Insurance
10.8%
Nordics
14.8%
Other
0.3%
France
12.0%
Rest of EMEA
15.3%
United Kingdom
8.3%
About African Development Bank
The African Development Bank Group is the premier development finance institution in Africa with a mandate to spur sustainable economic development and social progress in the continent, thereby contributing to poverty reduction. The Bank Group achieves this objective by mobilizing and allocating resources for investment in the continent; and providing policy advice and technical assistance to support development efforts. The African Development Bank's authorized capital of around USD 100 billion is subscribed to by 80 member countries made up of 54 African countries and 26 non-African countries.
The African Development Bank's Strategy for 2013-2022 (Ten-Year Strategy) reflects the aspirations of the entire African continent and is firmly rooted in a deep understanding and experience of how far Africa has come in the last decade, and where it wishes to go to in the next. In 2015 a new strategic operational agenda was laid out for the Bank, outlined in the "High 5s", aimed at providing a sharp focus on the Bank Group's work as it implements the Ten-Year Strategy. The High 5s are to: Light up and Power Africa; Feed Africa; Integrate Africa; Industrialize Africa; and Improve the Quality of Life for the People of Africa. These operational priorities are consistent with the Sustainable Development Goals and therefore essential in transforming the lives of the people of Africa through rapid, sustained, and inclusive growth.
For further details please contact the AfDB funding team: fundingdesk@afdb.org
