CAF sells first social bonds in euros

CAF sells first social bonds in euros

Bonds Debt Capital Markets Economy & Policy Fixed Income Funds Regions Coronavirus

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Latin American development bank CAF said on Wednesday it sold 700 million ($771 million) worth of five-year social bonds to finance coronavirus-related healthcare spending and emergency economic support to its member countries. 

CAF priced the new 1.625% 2025 notes at 99.938 to yield 1.638%, or 190 basis points over mid-swaps. 

The bookrunners BNP Paribas, Bank of America and Crédit Agricole opened the initial price talk around 200 basis points over mid-swaps. The spread was later set at 190 basis points as "momentum in the trade continued to build," according to CAF. With orders above €950 million, CAF launched the deal for €700 million in five-year bonds at 190 basis points over mid-swaps.  

A total of 85 investors participated, the majority from Europe. 

"This is the Latin American development bank's first public offering of social bonds," Manuel Valdez, head of debt capital markets funding and derivatives at CAF, told LatinFinance. "And we were very happy with the outcome given the high participation of the ESG investor base."

CAF organized its first social bond deal to fund its response to the coronavirus pandemic and set aside the proceeds for loans for healthcare services and economic recovery programs, it said.

"Last year, we developed our green bonds framework and, at the time, developing the social bonds framework was a medium-term project. But in order to respond to the COVID-19 emergency, we decided to accelerate this project," Valdez said. "If you read our social bonds framework, you will see it is focused on COVID-19."

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

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. 

In February last year, CAF sold $1.25 billion in dollar-denominated bonds with a coupon on 3.25%, following the sale of €750 million in five-year, euro-denominated bonds from the previous month.  

Moody's affirmed CAF’s long-term Aa3 issuer rating with a stable outlook in April last year. However, S&P Global downgraded CAF to A+ with a negative outlook from AA- in February last year due to its exposure to Venezuela In January, Fitch ratings also downgraded CAF to A+ with a negative outlook from AA- based on the bank’s exposure to Venezuela, Argentina and Bolivia.