The S&P Global Ratings has assigned a AA-rating to African Development Bank Group (AfDB) for its inaugural hybrid capital issuance, which is expected to position the bank as a pioneer in innovative sustainable financing globally
The AA-rating to the debut transaction is the highest rating for hybrid capital and the first ever to be issued by a multilateral development bank.
According to the bank, the proposed hybrid capital will have a multiplier effect on its financing and allow for the issuance of additional green, social and sustainable bonds to finance projects targeting some of the Sub-Saharan Africa’s (SSA’s) most critical development challenges including food security, access to water and health services, and climate change.
The AfDB President, Dr. Akinwumi Adesina, pointed out that the decision by the bank’s board to issue the hybrid capital was informed by recent calls to global and regional multilateral development banks to change their business models to leverage more financing at scale, to tackle climate change and accelerate development.
He said: “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 expressed his delight on the historic achievement by the bank, assuring that “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.”
Commenting on the proposed transaction, S&P Global Ratings stated: “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 AfDB’s hybrid capital initiative has continued to elicit attention from global investors, including from the G20 Capital Adequacy Experts group, which has recommended that other multilateral development banks should also explore hybrid capital instruments as funding options for key projects.
Hybrid capital is a combination of debt and equity that complements rather than replaces both. It is a financing instrument being used globally by corporates, financial institutions, insurance companies, and agencies.
Despite its strategic importance to the global financial system, hybrid capital has not yet been embraced by multilateral development banks as instruments for projects’ funding.
