The World Bank will issue up to $1 billion in its first hybrid note this year | World News | Trending Viral hub


World Bank, World Bank Group

The World Bank would be only the second multilateral lender to issue such an instrument after the African Development Bank (AfDB) sold its hybrid equity note in January. Photo: Bloomberg

The World Bank is looking to issue up to $1 billion in a first hybrid bond in capital markets this year, a senior executive told Reuters, as development banks face increasing pressure to find new ways to boost their lending. .

The G20 group of major economies has urged multilateral lenders to explore hybrid financing structures in an effort to try to maximize balance sheets and increase financing to help developing economies cope with crises, including climate change.

The World Bank would be only the second multilateral lender to issue such an instrument after the African Development Bank (AfDB) sold its hybrid equity note in January, the first such financing of its kind by a lender. multilateral.

When the AfDB sold this deeply subordinated, debt-like capital instrument, it said it hoped to establish it as a new asset class.

“We are working toward a possible pilot transaction sometime this calendar year,” said George Richardson, director of the investment and capital markets department at the World Bank Treasury.

“It would be interesting to see if we can find a new way to raise money. The proof is in the pudding,” Richardson said, adding that the lender was talking to investors about the issue and was also closely monitoring market conditions.

Regarding the ratings that would be assigned to the new instrument, Richardson said the World Bank was convinced that hybrid capital issued by multilateral development banks would be a better credit, compared to senior unsecured bonds, than that currently reflected in the methodologies of the rating agencies. .

“These statements establish that hybrid capital will be rated between 3 and 5 notches below the senior ratings,” he said, adding that Fitch was undergoing a methodology change and it remained to be seen what changes the rating agency would make on hybrid capital. .

“We are not commercial banks or a company. Our governance and ownership structure makes us better creditors than commercial banks and companies,” he added.

Moody’s assigned an AA3 rating to the AfDB issue, three notches below the bank’s AAA-rated bonds. The AfDB’s hybrid issue was trading at 97.6 US cents on Tuesday, according to LSEG data, down from its debut of just over 100 US cents in early February.

First published: April 3, 2024 | 12:00 AM IS


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