CAF First Latin American Issuer to Place SOFR-based Bonds
The USD 400 million issue marks a milestone for the development bank of Latin America, placing it at the forefront of global organizations advancing in the adoption of more reliable reference rates ahead of the discontinuation of the LIBOR rate.
CAF—development bank of Latin America—became the first Latin American issuer to place bonds under the SOFR (Secured Overnight Funding Rate), which has consolidated as an alternative replacement rate to the traditional LIBOR rate, which for the last few decades has been a market reference and is in the process of being phased out. The three-year issue totaled USD 400 million, with a SOFR+62 basis points coupon, and was structured by JP Morgan.
“We are very pleased with the confidence of investors in CAF’s financial strength and in attracting funds to support the countries’ action plans to improve the well-being of the population and the economic revival of the region. We are also proud to be at the forefront of markets, as this transaction positions us as the first issuer in Latin America to issue SOFR-linked bonds,” said Renny López, CAF’s interim executive president.
With the discontinuation of the LIBOR benchmark rate, which reflects the average interest rate at which a selection of banks lend each other money with no hedging in the money market, the SOFR emerges as an efficient alternative as it will be used by banks to price derivatives and dollar-denominated loans, and is administered by the Federal Reserve Bank of New York and published on the website http://www.newyorkfed.org.
CAF has been engaged in a diversification strategy for its financing sources for the past three decades, through an uninterrupted presence in global capital markets, which has given it a privileged position internationally. CAF promotes sustainable development and regional integration through efficient funds mobilization for the timely provision of high-value-added multiple financial services to clients in the public and private sectors of shareholder countries..
CAF closed 2020 with a record USD 14 billion in loan approvals, mostly to address the effects of the pandemic on the economy and healthcare systems, as well as to improve digital, land and energy infrastructures. At the close of its 50th anniversary, the multilateral agency had accumulated a total of more than USD 200 billion in approvals since 1970 to promote sustainable development and regional integration.
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