In Milestone for SOFR Market World Bank Prices Longest Floating Rate Benchmark
The World Bank (International Bank for Reconstruction and Development, IBRD, Aaa/AAA) priced a new USD 600 million 10-year benchmark bond linked to the Secured Overnight Financing Rate (SOFR) index. This 10-year benchmark adds investors and liquidity to the SOFR market, and marks a milestone in the development of robust alternatives to US dollar London Inter-Bank Offered Rate (LIBOR).
The SOFR-linked bonds responded to investor demand from US financial institutions, global bank treasuries and asset managers seeking long duration, high-quality floating rate assets. The proceeds from the bonds will be used to finance the World Bank’s sustainable development activities, including its response to the social, economic and health effects of the COVID-19 pandemic.
The high-quality orderbook was oversubscribed and closed with over USD 640 million of interest from about 20 investors. Joint lead managers for the transaction are RBC Capital Markets and Wells Fargo Securities.
Jingdong Hua, Vice President and Treasurer, World Bank said, “With this 10-year and recent 3 and 7-year floating rate transactions, the World Bank is showing its commitment for the development of the SOFR market. We thank investors for their confidence in the World Bank, and for supporting this important evolution to extend the SOFR market into longer-dated maturities, which is key to the efficient functioning of the global financial system on which the economic development of our members depend.”
Investor Distribution
| By Geography | By Investor Type | ||
| Americas | 85% | Banks, Bank Treasuries, Corporates | 82% |
| Europe, Middle East, Africa | 15% | Asset Managers, Insurance, Pension Funds | 18% |
Joint Lead Manager Quotes
“Access to liquid funding markets is a cornerstone of the World Bank’s ability to support Sustainable Development around the world and this is reflected in their active role in promoting the transition to risk free rates starting with their pioneering SOFR benchmark in 2018. With this first ever 10-year SOFR benchmark, World Bank is now the only issuer among its Sovereign, Supranational and Agency (SSA) peers who can present a liquid SOFR curve from 2 years to 10 years and I am sure this example will encourage others to follow suit,” said Jigme Shingsar, Managing Director, RBC Capital Markets.
“The World Bank once again breaks the record and leads the way by issuing the first ever 10-year SSA SOFR transaction. A remarkable trade that not only becomes the longest of its kind, but also reaches deep into an ever-growing investor base for SSA floating rate bonds in the Americas. Only an issuer of the stature and experience of the World Bank would venture to do this and end up with an oversubscribed orderbook. Hats off to the entire World Bank team for another highly successful trade,” said Carlos Perezgrovas, Head of SSA Origination, Wells Fargo Securities, LLC.
Transaction Summary
| Issuer: | World Bank (International Bank for Reconstruction and Development) |
| Issuer rating: | Aaa / AAA (Moody’s/S&P) |
| Amount: | 600,000,000 |
| Settlement date: | February 11, 2021 |
| Maturity date: | February 11, 2031 |
| Re-offer spread: | Compounded SOFR + 37 bps |
| Compounded SOFR: | Calculated on the basis of the evolution of the value of the SOFR Index from the SOFR IndexStart value date to, but excluding, the SOFR IndexEnd value date with regard to the relevant interest period |
| Coupon payment dates: | Paid quarterly on February 11, May 11, August 11, and November 11 each year, from and including May 11, 2021, to and including the maturity date |
| Reoffer Price: | 100.00% |
| Denomination: | USD 1,000 and multiples thereof |
| ISIN: | US459058JU87 |
| Clearing systems: | Fedwire, Euroclear, Clearstream |
| Listing | Luxembourg Stock Exchange |
| Joint lead managers: | RBC Capital Markets, Wells Fargo Securities |
For more information on the World Bank Group and COVID-19: www.worldbank.org/en/who-we-are/news/coronavirus-covid19