AfDB opens $2Bn social bond amid strong global investor appetite

• The AfDB’s mandate for a three-year social bond was announced on Wednesday, 17th January 2024.
• This issuance is a significant highlight amid a dynamic week in the USD SSA markets, witnessing the launch of eight benchmarks totaling US$17.25 billion within a span of two days.
• This new three-year Social Benchmark is the Bank’s first global benchmark of the year.

The African Development Bank has issued its first ever three-year social bond targeting to raise US$2 billion under its recently established Sustainable Bond Framework, which was launched in September 2023.

Set to mature on February 25, 2027, the Sustainable Bond Program seamlessly integrates and strengthens the African Development Bank’s existing Green and Social Bond initiatives, streamlining the issuance of green bonds, social bonds, and sustainability bonds.

This new three-year Social Benchmark is the Bank’s first global benchmark of the year, strategically aligning with the robust reopening of primary markets in January 2024.

This issuance is a significant highlight amid a dynamic week in the US$ SSA markets, witnessing the launch of eight benchmarks totaling US$17.25 billion within a span of two days.

With this transaction, the African Development Bank will continue to carry out its funding strategy of issuing large liquid benchmark transactions and adds another on-the-run reference in the three-year maturity. The Bank was able to successfully secure the tightest pricing among Multilateral Development Banks (MDBs) both versus swaps and US Treasuries.

“The extended scope of this new Sustainable Bond Framework will allow the African Development Bank to issue sustainability bonds, in addition to green bonds and social bonds, thus potentially increasing the Bank’s future ESG issuance and contributing to the development of the Sustainable Bond market,” the lender said in its sustainable bond framework report.

Read also: AfDB approves $696.4M financing for Tanzania-Burundi-DRC railway project

Social bond growing popularity globally

The issuance received strong support from the global investor community, with an order book in excess of US$3.5 billion and attracted high-quality investors, including central banks, official institutions, and bank treasuries, constituting 78 per cent of the book.

Distribution was well diversified across geographies and investor profiles, with 76 orders in the book. The social label garnered interest from ESG investors, representing 38 per cent of participants in the book.

The AfDB’s mandate for a three-year USD Global Benchmark was announced on Wednesday 17 January at 15:00 London time, taking advantage of favorable market conditions and a strong primary market backdrop. Initial Pricing Thoughts (IPTs) were released at SOFR mid-swaps plus 33bp (basis points) area.

The deal enjoyed good investor demand during the overnight session with Indications of Interest (IoIs) reaching US$2.1 billion by the time books officially opened on Thursday 18 January at 08:00 London time.

The orderbook continued to grow throughout the European morning, with investor demand reaching US$3.6 billion by 10:50 London time, which allowed the spread to be tightened by 2bps and set at SOFR mid-swaps plus 31bps.

Books closed at 13:00 London time, and the high quality of the orderbook, which was in excess of US$3.5 billion, allowed for the launch of the transaction with a size of US$2 billion.

The trade officially priced at 15:18 London time with a reoffer yield of 4.221percent, equivalent to a spread of 10.3bps vs UST 4 per cent Jan-27, the tightest print vs UST in the USD SSA primary market so far this year.

The final order book closed in excess of US$3.5 billion with more than 70 orders.

Transaction details: