The African Development Bank (AfDB), rated Aaa/AAA/AAA, has successfully launched and priced its second hybrid capital transaction, raising USD 500 million through perpetual subordinated hybrid capital notes. The instrument carries an annual coupon of 5.875% until August 2035, with a first call option after 10 years at the Bank’s discretion. This achievement underscores AfDB’s leadership in pioneering innovative financial instruments to strengthen its balance sheet, in line with G20 recommendations, while advancing the development of the Multilateral Development Bank (MDB) hybrid capital asset class.
The transaction drew strong interest from global investors, achieving an order book of over USD 4 billion—eight times oversubscribed—with participation from nearly 200 investors. Asset managers accounted for the majority of allocations at 60%, followed by hedge funds, pension funds and insurers, and banks. Geographically, demand was dominated by the UK, with further strong participation from Europe, the Middle East, Africa, the Americas, and Asia. BNP Paribas and Goldman Sachs acted as Joint Structuring Agents, alongside Citi, HSBC, and UBS as Joint Lead Managers.
Hybrid capital is considered an innovative form of financing that enhances AfDB’s lending capacity. The notes are expected to receive 100% equity treatment from Fitch, Moody’s, and S&P, and under IFRS accounting. They feature a fixed coupon until 2035, after which rates reset every five years based on prevailing U.S. Treasury yields. AfDB retains redemption options at reset dates, rating or accounting events, or under substantial repurchase circumstances. A new feature, the “Alignment Event,” allows the Bank to adjust terms in line with evolving rating agency criteria, provided investors are not disadvantaged.
Coupon payments on the notes are discretionary and can be mandatorily cancelled if AfDB’s asset-to-capital ratio exceeds 7.5x. In such cases, shareholder distributions would also be halted until interest payments resume. The notes are subordinated, with provisions for a permanent principal write-down if callable capital is required. Unlike AfDB’s inaugural hybrid issue, this transaction is not labeled as sustainable, with proceeds directed to support the Bank’s Ten-Year Strategy and “High 5” priorities for accelerating Africa’s development.
Senior AfDB leaders emphasized the success of the issuance as a milestone in consolidating investor confidence in the hybrid capital market. CFO Hassatou N’Sele highlighted the record demand of over USD 4 billion as a signal of strong market trust in the Bank’s innovative financing tools. Treasurer Omar Sefiani underscored the role of hybrid capital in expanding AfDB’s lending capacity to support African communities, while Keith Werner, Division Manager for Capital Markets, noted the growing participation from long-term investors as evidence of increasing confidence in the product.
The transaction execution began with investor calls on 22 September 2025, led by BNP Paribas and Goldman Sachs. Following robust engagement, initial pricing thoughts of 6.375% were announced on 23 September. Strong demand quickly pushed the order book beyond USD 2.8 billion by midday, eventually exceeding USD 4 billion, enabling the Bank to finalize the issue size at USD 500 million and set the coupon at 5.875%. The final pricing represented a spread of 165.3 basis points over U.S. Treasuries. This marks a significant step in AfDB’s ongoing strategy to strengthen its capital base and accelerate transformative investments across Africa.
