WASHINGTON, D.C., August 14, 2018 – The World Bank (International Bank for Reconstruction and Development, IBRD, Aaa/AAA) today priced its first Secured Overnight Financing Rate (SOFR) bond. The 2-year USD-denominated benchmark bond raised USD 1 billion from investors in the Americas and Europe. This is the first SSA-issued SOFR-linked bond and represents the second transaction in the market. Proceeds of the bond will support the World Bank’s global efforts to end poverty and create opportunity.
This latest World Bank bond transaction responds to investor demand for high quality assets and helps develop the market for SOFR – a rate based on transactions in the U.S. Treasury repurchase market and an alternative reference rate to USD LIBOR.
There were orders for approximately USD 1.4 billion from 27 investors representing central banks and official institutions (57%), and bank treasuries and corporates (22%), and asset managers, insurance and pension funds (21%). Joint lead managers for this global bond are Citi and TD Securities.
The 2-year benchmark has a coupon of SOFR + 22bps, reset daily and paid quarterly with a 4-day lockout and a maturity date of August 21, 2020.
“Freddie Mac was pleased to invest in the World Bank’s first issuance of a SOFR floating-rate bond. This landmark transaction – a first of its kind by a supranational issuer – is an important step in the development of an alternative reference rate,” said Mike Hutchins, Executive Vice President of Investments & Capital Markets, Freddie Mac.
“Given its global responsibilities, the World Bank’s decision to issue a SOFR note sends an important signal to market participants. SOFR is fast developing into a robust and durable reference rate that is a strong choice for a wide range of cash products,” said Randal Quarles, Vice Chairman for Supervision, Federal Reserve Board.
“The World Bank is honored to work with our investors and partners to be the first supranational issuer of a SOFR-linked bond. Today’s transaction is an important step in developing robust alternatives to LIBOR, thereby strengthening the global financial system. Our bond extends the current SOFR curve from 18 to 24 months which further develops this market and creates more options for investors. We have a proud history of innovation supporting market developments and we appreciate the collaboration with our financial partners, our colleagues on the Federal Reserve’s Alternative Reference Rate Committee, and our investors whose enthusiasm for this transaction will propel the continued growth of the SOFR market,” said Arunma Oteh, Vice President and Treasurer, World Bank.
“This is an important deal for the US dollar bond markets, assisting both the investor and market making community in their growing familiarity with the new SOFR reference rate. The World Bank’s premier league status and recognition across the investor community, particularly in North America makes it the perfect issuer for such a significant market development role,” said Philip Brown, Head of Public Sector Debt Capital Markets, Citi.
“The World Bank has once again demonstrated its leadership and ability to innovate in the capital markets by bringing the inaugural SSA SOFR FRN to the USD market. This pioneering deal will pave the way forward for all market participants in a post LIBOR world. TD was delighted to have advised the World Bank on such a ground-breaking trade,” said Laura Quinn, Managing Director, Head of Origination, TD Securities.
Investor Distribution
By Geography | By Investor Type | ||
US | 75% | Central Banks/Official Institutions | 57% |
Americas | 19% | Banks/Bank Treasuries/Corporates | 22% |
Europe | 6% | Asset Managers/Insurance/Pension Funds | 21% |
Transaction Summary
Issuer: | World Bank |
Issuer rating: | Aaa /AAA |
Maturity: | 2-year |
Amount: | USD 1 billion |
Settlement date: | August 21, 2018 |
Floating Rate | SOFR, as defined in the final terms, and subject to the fall-back provisions therein |
Coupon: | SOFR + 22 bps, reset daily, paid quarterly with a 4-day lockout, Act/360 |
Coupon payment dates: | Paid quarterly on February 21, May 21, August 21, and November 21 of each year. |
Maturity date: | August 21, 2020 |
Issue price: | 100% |
Listing: | Luxembourg Stock Exchange |
Clearing systems: | Fedwire, Euroclear, Clearstream |
ISIN: | US459058GK33 |
Joint lead managers: | Citi, TD Securities |
The World Bank issues between US$40-US$50 billion annually in bonds for sustainable development. These range from structured notes that highlight the Sustainable Development Goals to benchmark-sized issuances that cover a variety of impact themes including climate, education, gender, health, social services and clean water and sanitation. A key priority for the World Bank’s engagement in the capital markets is to build strategic partnerships with investors and other market participants to raise awareness for development challenges and accelerate opportunities to mobilize finance for development.
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization. Created in 1944, it is the original member of the World Bank Group and operates as a global development cooperative owned by 189 nations.
The World Bank provides loans, guarantees, risk management products, and advisory services to middle-income and other creditworthy countries to support the Sustainable Development Goals and to end extreme poverty and promote shared prosperity. It also provides leadership to coordinate regional and global responses to development challenges.
The World Bank has been issuing sustainable development bonds in the international capital markets for over 70 years to fund programs and activities that achieve a positive impact. More information on World Bank bonds is available at http://treasury.worldbank.org.
