African Development Bank (AfDB), rated Aaa (Stable) / AAA (Stable) / AAA (Stable (Moody's / Fitch / S&P), successfully priced a NZD 100 million 5-year Kauri benchmark due 27th August 2019 through TD Securities. The notes pay a coupon of 4.50% and marks the first Kauri from the AfDB since February 2008.
With conditions in New Zealand dollars becoming more favourable for both issuers and investors alike, AfDB was one of the first supranationals to take advantage of the thriving market sentiment by launching its new 5-year Kauri issue into Asia on Monday, August 18. The transaction was immediately met with solid investor interest and priced the following day in line with guidance at a level of midswaps plus 20 basis points, which equates to 63 basis points over the New Zealand Government Bond (NZGB) 5% March 2019.
AfDB's first Kauri offering in over 6 years was able to draw in extra investor attention for its rarity value. However given the advanced stage of the Bank's funding programme for the year, the deal size was capped at a maximum of NZD 100 million from the outset.
A total of 7 investors from Asia participated in the transaction with high quality orders coming from central banks and official institutions (40%), asset managers (40%) and pension funds (20%).
AfDB Group Treasurer Pierre Van Peteghem said, "One of the main pillars of the Bank's funding strategy is its ability to diversify its funding sources by responding to investor demand across a vast array of capital markets worldwide. After the first foray of the Bank in the domestic capital market of Nigeria this past July, the launch of this 5-year bond marks the return of the Bank into the so-called 'Kauri' market consisting of NZD denominated securities, registered in New Zealand and issued by foreign issuers. Favorable market conditions and increased name recognition due to sustained marketing efforts allowed the Bank to successfully raise NZD 100 million in this market after a 6-year absence. Despite lower annual funding requirements than its peers, the Bank will continue to pursue its funding diversification strategy in Africa and elsewhere."
"The Kauri market is buoyant," said Salvatore Aloisi from TD Securities. "Looking at New Zealand dollars, there is a really nice pick-up over Australian dollar yields and investors are comfortable with the currency because the economy is booming. We're getting good demand from domestic institutional investors for the Kauris and retail accounts are interested in Eurobonds. Issuers have been keen to take advantage of the thriving market, with the African Development Bank selling its first print in six years this week."
Terms of Transaction
Issuer: African Development Bank (AfDB)
Rating: Aaa (Moody's) / AAA (S&P) / AAA (Fitch)
Issue amount: NZD 100 million
Pricing Date: 19 August 2014
Settlement Date: 27 August 2014
Coupon: 4.50% (semi-annual)
Maturity: 27 August 2019
Reoffer Price: 99.805166%
Reoffer Yield: 4.544% (semi-annual)
Re-offer vs. Mid-Swaps: +20 bps
Re-offer vs Benchmark: NZGB 5.00% 15th March 2019 +63 bps
Lead Manager: TD Securities