The Acting Treasurer of the African Development Bank (AfDB) has indicated that the institution may introduce its inaugural hybrid capital note, with an anticipated size ranging from $500 million to $1 billion, contingent upon favorable market conditions. The potential launch is slated for the conclusion of the current month.
AfDB is poised to achieve a milestone by becoming the inaugural multilateral lender to issue a perpetual hybrid note. This distinctive financial instrument, characterized by its deeply subordinated nature and possessing attributes of both debt and equity, is anticipated to carry a credit rating lower than the AAA rating associated with the lender’s bonds.
“We have been prepared to initiate the issuance process since the conclusion of September. Regrettably, prevailing market conditions have not been optimal. Ensuring the precision of this transaction is of paramount importance to us. It serves as a pivotal benchmark for subsequent transactions,” conveyed the Acting Treasurer of the bank, Omar Sefiani, in an interview with Reuters.
Omar Sefiani indicated that the issuance of the note may transpire before the close of November, contingent upon further improvements in financial market conditions and preceding the year-end book closures by investors in December. Alternatively, the debut could potentially be deferred until the year 2024.
The G20 Group of Nations has encouraged multilateral lenders to explore hybrid financing structures, aiming to optimize their balance sheets and enhance funding support for developing economies grappling with diverse challenges, including the imperative of adapting to climate change.