AfDB Secures $500m in Second Hybrid Capital Transaction
The African Development Bank (AfDB) has successfully launched its second hybrid capital transaction, raising USD 500 million through perpetual subordinated hybrid capital notes. The notes, rated Aaa/AAA/AAA by Moody’s, S&P and Fitch, carry an initial coupon of 5.875% annually until August 2035, with the first call option at the Bank’s discretion after 10 years.
The issuance was met with strong investor demand, attracting an order book of more than USD 4 billion – eight times oversubscribed – from nearly 200 investors across the globe. Asset managers accounted for the bulk of allocations (60%), followed by hedge funds (29%), pension and insurance funds (9%) and banks (2%). The largest demand came from the United Kingdom (56%), followed by Europe, the Middle East and Africa (21%), the Americas (15%) and Asia (8%).
Hybrid capital, considered an innovative financial instrument, increases AfDB’s lending capacity by being recognised as 100% equity by rating agencies and under International Financial Reporting Standards (IFRS). This strengthens the Bank’s balance sheet and its ability to channel more resources towards Africa’s development priorities.
Unlike AfDB’s inaugural hybrid issuance, which carried a sustainable label, the proceeds from this transaction will be used for general operations aligned with the Bank’s Ten-Year Strategy and its “High 5” development priorities.
Hassatou N’Sele, Vice President for Finance and Chief Financial Officer, said: “The success of this issuance, which attracted a peak order book of more than USD 4 billion from 200 investors, demonstrates market confidence in our hybrid capital. This is another step in the development of this asset class and a powerful way to rally private sector investment in support of development.”
Omar Sefiani, AfDB Treasurer, highlighted the significance of the deal: “This marks a significant milestone for this asset class that is still growing. By boosting the Bank’s lending capacity, hybrid capital allows the Bank to deliver more for communities in Africa.”
The transaction was arranged with BNP Paribas and Goldman Sachs International as Joint Structuring Agents, and BNP Paribas, Citi, Goldman Sachs International, HSBC and UBS acting as Joint Lead Managers.
The strong reception highlights the AfDB’s pioneering role in deploying hybrid capital among multilateral development banks, setting the pace for innovative financing to accelerate Africa’s economic transformation.
