AfDB to issue first hybrid capital bond by year-end

AFRICAN STOCKS AND FINANCEOctober 17, 2023 at 12:09 PM UTC

The African Development Bank (AfDB) is considering issuing its first hybrid capital bond by the end of the year, pending stable financial market conditions, as stated by its Chief Financial Officer, Hassatou Diop N’Sele, during an interview at the International Monetary Fund (IMF) and World Bank Annual Meetings in Marrakech, Morocco.

The bond is expected to be of "benchmark" size, although the specific amount and pricing were not disclosed. Notably, the AfDB's bond will feature "100% equity content." Hybrid capital bonds are financial instruments that combine elements of both debt and equity, often carrying lower credit ratings compared to more senior bonds.

This comes as multilateral development banks like the AfDB are under increasing pressure to optimize their balance sheets and explore innovative financing methods to increase lending capacity for development and address climate change challenges.

Key Takeaways

S&P Global, which assigned an AA-minus credit rating to the forthcoming notes in contrast to the bank's AAA rating, anticipates that the issuance will range from $250 million to $1 billion, contingent on market conditions. In response to mounting calls for reform, multilateral development banks, such as the World Bank, have been outlining ambitious plans to accelerate and enhance their lending capacity. Meanwhile, efforts to reach an agreement among IMF member countries on a U.S.-supported proposal to increase IMF funding without proportionately increasing shares allocated to China and other significant emerging markets did not succeed.

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