The World Bank is looking to issue up to $1 billion in a debut hybrid note on 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 a push to try and maximise balance sheets and increase funding to help developing economies cope with crises, including climate change.
According to a Reuters report, the World Bank would be only the second multilateral lender to issue such an instrument after the African Development Bank (AfDB) sold its hybrid capital note in January – the first such financing of its kind from a multilateral lender.
When the AfDB sold this deeply subordinated, debt-like equity instrument, it said it hoped to establish this as a new asset class.
Looking at 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, relative to senior, unsecured bonds than currently reflected in the rating agencies’ methodologies.
Data from the Institute for Supply Management showed U.S. manufacturing grew for the first time in a year-and-a-half in March.
Moody’s assigned an AA3 rating to the AfDB issue, three notches below the bank’s AAA rated bonds. The AfDB hybrid issue traded at 97.6 cents in the dollar on Tuesday, according to LSEG data, below its debut of just over 100 cents in the dollar in early February.
