For the cheapest international loan in its history, the West African bank targeted a little-exploited but promising market. The analysis of Jeune Afrique.

The avalanche of figures and esoteric data in the official statement could make us forget the essentials. A loan of €750 million; a maturity of twelve years; a coupon of 2.75% or a spread of 300 basis points compared to the average rate...

The bottom line is that for its fourth foray into the international bond debt market, carried out at the end of January, the West African Development Bank (BOAD) has secured the lowest funding in its history for a Eurobond, by backing it with a commitment that is still rare in African financial centres: the financing of "sustainable" projects.

90% of resources for green and social projects

"The issuer intends to allocate approximately 90% of the net proceeds of the bonds issued [...] to the refinancing of existing eligible green and social projects, with the remaining proceeds to be used to finance new eligible green and social projects."

This is the promise made by  BOAD, according to a document consulted by Jeune Afrique, to the 260 investors who have come forward from London (40%) to other European markets (40%), through the United States (17%), and even Asia and the Middle East, for the remainder.

A "pool of available euro liquidity"

Some will note that the rate of 2.75% for twelve-year debt remains very attractive for European investors, while the debt market remains structurally depressed on the Old Continent. The average yield for a similar maturity on all European bonds is -0.053% according to the European Central Bank. The markets are even willing to pay AAA-rated issuers for the honor of holding their twelve-year debt (i.e. a rate of -0.47%)...

The existence of a market depth in euros is a new fact

Others will rather note the fact that only fifteen months ago, in October 2019,  BOAD had to agree to a rate of 4.7% to borrow $ 830 million from international markets, for a similar maturity.

Moreover, in addition to this lower rate,  BOAD carried out this issue in euros, the price of which is stable vis-à-vis the CFA franc, the currency of the member countries and the clients of the development institution. "The new fact is the existence of a market depth in euros", explains financier Lionel Zinsou.

Specialists in African sovereign debt may remember that a few years ago Senegal had to subscribe to swap contracts (conversion) for its Eurobonds into dollars, to hedge against a depreciation of the CFA against the greenback...

For the boss of SouthBridge, the success of the BOAD issue is a most positive sign. "For countries that have very stable currencies, this means that a pool of additional liquidity is opening up, in euros, which is added to the dollar market," explains Lionel Zinsou.

Funds dedicated to sustainable investments

In addition to the revelation of this "euro financing pool", BOAD's loan  signals above all a market appetite for "green financing". Alain Tchibozo, chief economist of  BOAD, recruited by Serge Ekué, was not mistaken.

Our show came at the right time!

Alongside asset managers (75%), accustomed to this type of subscription, more than 20% of institutional investors (banks, insurers, pension funds) participated in the issuance of BOAD.

"The Covid-19 crisis has demonstrated to all the importance of sustainable development. That is the message that has been sent to investors. Especially since there are investment funds dedicated solely to supporting such projects. Our show came at the right time! " says Alain Tchibozo.

As proof, while " BOAD was asking for 600 million euros, it obtained 750 million. And there were 4 billion euros in the order book [4.4 billion according to the official count]," adds Lionel Zinsou.

About fifty projects identified

"For this envelope, about fifty projects that meet sustainable development standards will be financed," explains Alain Tchibozo. According to the note to investors we consulted, no less than €1 billion of "eligible green and social projects" have already been identified by  BOAD.

Among them, a solar power plant capable of providing 39,000 MWh per year in Korhogo, in the north of Côte d'Ivoire, a water treatment plant with a production capacity of 288,000 cubic meters per day in Bamako, capital of Mali, the construction of 500 classrooms in Senegal that can accommodate 28,560 students Ves...

According to our information,  BOAD anticipates 3,300 billion CFA francs (more than 5 billion euros) in total commitments "to achieve the development results defined in the 2021-2025 strategic plan".