AfDB Issues Highest Rated Hybrid Capital By A Multilateral Development Bank

The African Development Bank Group has received global recognition for its inaugural hybrid capital issuance, positioning the Bank as a pioneer in innovative sustainable financing.

The S&P Global Ratings assigned a AA-rating to the debut transaction, the highest rating for hybrid capital. The proposed issuance would be the first ever by a multilateral development bank.

Hybrid capital will have a multiplier effect on the Bank’s financing, and allow for the issuance of additional green, social and sustainable bonds to finance projects targeting some of the continent’s most critical development challenges including food security, access to water and health services, and climate change.

According to the President of the African Development Bank Group, Dr Akinwumi Adesina, global and regional multilateral development banks are being asked to change their business models to leverage more financing at scale, to tackle climate change and accelerate development. “The African Development Bank is a pioneer in financial innovations. Our decision to issue hybrid capital will allow us to leverage more financing from capital markets to further accelerate Africa’s growth and development,” Adesina said.

According to S&P, “As far as we are aware, the African Development Bank would be the first MLI (Multilateral Lending Institution) to incorporate hybrid capital into its capital structure.” The Bank’s hybrid capital initiative has garnered global attention, including from the G20 Capital Adequacy Experts group, which has recommended that other multilateral development banks also explore hybrid capital instruments.

Hybrid capital is a combination of debt and equity, that complements rather than replaces these two sources of finance. It is an established financing instrument that is widely used by corporates, financial institutions, insurance companies, and agencies, but has not yet been used by multilateral development banks.

“This is another way to bolster an MDB capital base and optimise its balance sheet. The African Development Bank is starting a new asset class, hybrid capital, issued by AAA-rated multilateral development banks,” said the Bank’s Vice President for Finance and Chief Financial Officer, Hassatou N’Sele.

Adesina said he was delighted with this historic achievement by the African Development Bank. “We will continue to respond and lead with financial innovations, in response to the need to leverage more financing, as per the global calls for reforms of the global financial architecture,” the bank chief said.