— On Wednesday, March 8, 2017, the African Development Bank (AfDB), rated Aaa (Moody’s) / AAA (S&P) / AAA (Fitch), launched and priced a new USD 2.5 billion 3-year Global benchmark transaction due March 16, 2020. The new 3-year issue is AfDB’s first USD Global benchmark transaction this year, following a EUR 1 billion 7-year benchmark transaction priced in January.
With a final size of USD 2.5 billion, the transaction was the largest benchmark ever launched by the Bank, and represents a clear step-up in issuing profile, positioning it within the restricted group of issuers of large, liquid global benchmark transactions. The size of the transaction and the increased borrowing program (USD 3.8 billion in 2012 versus USD 9.4 billion in 2017) reflect the growing operations of the Bank on the African continent. AfDB has also now completed 57% of its 2017 funding program.
Highlights from the execution of the transaction
The Bank decided to take advantage of the supportive market conditions for issuance and the clear execution window this week, ahead of the busy political and economic calendar in March. A mandate for a new 3-year USD Global benchmark was announced on Tuesday, March 7, 2017, at 1 pm London time, and Initial Pricing Thoughts (IPTs) in the context of mid-swaps (MS) plus 5 basis points (bps) area were released to the market in order to begin gathering Indications of Interest (IoIs) overnight. Joint-Lead Managers (JLM) for the transaction were BAML, Daiwa, Goldman Sachs International, JP Morgan and TD Securities.
The deal was met by strong investor interest from the outset and with IoIs in excess of USD 2.6 billion (excluding JLM interest), books were officially opened in the European morning on Wednesday at 8 am London time with a price guidance of MS+4bps area, 1bp tighter than IPTs. Momentum continued to build throughout the European morning. Books were in excess of USD 3.45 billion (excluding JLM interest) by 10.10 am London time, allowing the issuer to further tighten price guidance by 1bp and set the spread at MS+3bps, with books going subject for European and Asian investors at 10.30am London time. With books in excess of USD 3.8 billion (excluding JLM interest) by 12.15 pm London time, the transaction went subject for US investors at 8.30 am New York time.
On the back of extremely high quality orders and with final demand in excess of USD 3.8 billion (excluding JLM interest), the Bank decided to set the deal size at USD 2.5 billion. The pricing of the transaction took place at 6.25pm London time, with a re-offer yield of 1.926%, equivalent to a spread of 25.8bps against the 3-year 1.625% US Treasury bond due March 2020.
“We are very pleased with the outcome of this transaction: The largest benchmark ever launched by our institution, USD 2.5 billion, and its largest order book, greater than USD 3.8 billion, a testimony of investors’ interest in the AfDB name and credit.” Hassatou N’Sele, Director of the Treasury Department
Final distribution figures highlight AfDB’s strong penetration across key regions. The high quality orderbook saw 88 accounts participating in the transaction, including 13 that were new to the Bank, and was dominated by demand from Central Banks and Official Institutions, who took up the lion’s share of allocations at 69%.