CAF sets up social bonds in euros

CAF sets up social bonds in euros

Bonds Debt Capital Markets Fixed Income Latin America Coronavirus

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Latin American development bank CAF is holding calls with investors this week and setting up a benchmark-sized sale of social bonds denominated in euros, said a source involved in the deal. 

CAF has hired Crédit Agricole, BNP Paribas and Bank of America to lead a medium-term transaction next week, depending on market conditions, the source said. 

According to Manuel Valdez, head of debt capital markets funding and derivatives at CAF, the deal would be the development bank's first public offering of social bonds. "It is based on our theoretical framework of social bonds and in line with principles of social bonds," he said in an email to LatinFinance.

CAF created the social bond framework to fund emergency financing programs for its member nations to deal with the coronavirus pandemic, Valdez said. It will use the proceeds to provide financing for healthcare spending and emergency economic support, he added.

CAF announced a $2.5 billion emergency credit line in early April to counteract the economic downturn from the pandemic. It also introduced a $300 million credit line for healthcare in the region in early March to go along with $2.8 million in grants to Argentina, Ecuador, Panama, Paraguay, Peru, Trinidad and Tobago and Uruguay.

Earlier this month, CAF raised $800 million from the sale of three-year notes to support countercyclical lending in Latin America during the coronavirus crisis.