The milestone dual-tranche transaction marks a series of firsts for ADB with a highly tailored structure adopted to mirror the terms of the underlying loans that are to be funded with the proceeds.
The final maturities of the bonds are five and seven years, with an early redemption “call” option from the third and fifth years, respectively. The bonds pay a floating interest rate linked to the Kazakhstan Consumer Price Index, the first time ADB adopts such a structure in either mainstream or local currency borrowing. Furthermore, the bonds were auctioned and listed on the Kazakhstan Stock Exchange and settled through the Kazakhstan Securities Depositary—a first domestic market transaction for ADB in the country.
“This is a landmark in ADB’s strategy of delivering local currency funding solutions,” said ADB Treasurer Mr. Pierre Van Peteghem. “We have generated digital results from these bond issues in terms of highly innovative structure, development impact on the domestic capital market, and currency risk mitigation for ADB’s borrower.”
While the bonds were fully placed with institutional investors in Kazakhstan, a hybrid approach was adopted by issuing and documenting the transaction under ADB’s Global Medium-Term Note program and English law, a first for ADB in any developing member country. Tengri Capital acted as sole lead manager.
ADB is a regular borrower in mainstream international bond markets but has also led issuance in developing Asian countries as part of efforts to promote domestic bond markets as an alternative to bank lending. Overall, ADB raised more than USD23.5 billion from the capital markets in 2018.
On January 24th 2019, ADB returned to the US dollar bond market with the pricing of a USD3.5 billion 5-year global benchmark bond issue, proceeds of which will be part of ADB’s ordinary capital resources./.