The African Development Bank (AfDB), has launched and priced a new US$ 2 billion 5-year Social Benchmark transaction due 18 September 2029, coinciding with the 60th anniversary of the founding of the continental bank.

The bond was launched on Tuesday 10 September and pays a coupon of 3.500 percent with a re-offer yield of 3.574 percent and a reoffer price of 99.664 percent.

The new 5-year USD transaction, issued in a social bond format under the Bank’s Sustainable Bond framework, marks AfDB’s second US$Global Benchmark in 2024 following the 3-year US$2 billion social benchmark transaction issued in January.

The new transaction brings an on-the-run reference point in the 5-year part of the USD curve, extending AfDB’s outstanding curve, and demonstrating the issuer’s commitment to maintain liquid lines at key benchmark maturities. 

With the final order book closing in excess of US$3.7 billion (including US$150 million of Joint Lead Managers (JLMs) interest), and 66 investors participating, the success of this 5-year transaction is a clear vote of confidence from investors in AfDB’s AAA credit. 

The strong participation from ESG investors representing 25 percent of the final order book also highlights investors’ confidence in the Bank’s Sustainable Bond Framework and development mandate.

The African Development Bank’s mandate for a new 5-year USD Social Benchmark was announced last week. 

Initial Pricing Thoughts (IPTs) were released thereafter at 12:53 UKT at SOFR Midswaps + 42 basis points (bps) area.

Investor demand was strong from the outset as Indications of Interest (IoIs) from AfDB’s high quality investor base accumulated at a rapid pace, exceeding US$2.5 billion (including USD 150 million JLM interest) overnight. 

Books officially opened the following morning, on Tuesday 10th September at 8:01 UKT, with price guidance tightening by 1bp to SOFR Midswaps + 41bps area.

The order book continued to grow throughout the morning, with investor demand approaching US$3.3 billion (including US$150 million JLM interest) by 10:19 UKT, and the issuer set the spread at SOFR Midswaps + 41bps.

 At 13:52 UKT, the quality of the order book allowed the issuer to set the size at US$ 2 billion, as the final order book closed in excess of US$3.7 billion (including USD 150 million JLM interest). 

At 15:58 UKT, the transaction officially priced at SOFR Midswaps + 41bps, equivalent to a reoffer yield of 3.574 percent and a spread of 11.27bps vs the on-the-run 5-year US Treasury (UST 3.625 percent Aug-29).

The geographical distribution highlights a diversified investor base with Americas (47 percent), followed by Europe, Middle East and Africa (EMEA) (32 percent) and Asia (21 percent).

The African Development Bank (AfDB) has become a significant player in the issuance of social bonds, which are financial instruments designed to fund projects that generate social benefits. These bonds align with the bank’s goals of promoting inclusive and sustainable growth across Africa.

AfDB issued its first social bond in 2017 and has since raised billions of dollars to support various social projects across the continent. 

The bond proceeds are directed towards projects that aim to reduce poverty, healthcare projects, education, gender equality and affordable housing.