First-of-its-kind vehicle to improve economic inclusion of young people
LONDON, September 17, 2014 /3BL Media/ — Citi priced a $500 million four-year Education, Youth and Employment (EYE) bond on behalf of The Inter-American Development Bank (IDB or IADB) on Tuesday – a first-of-its-kind investment vehicle, created with the support of Citi Microfinance. Proceeds from the note sale will be directed to programs that build human capital through early childhood care and education, formal primary and secondary education, as well as labor market placement and vocational training.
At a time when young people across Latin America face greater difficulty in securing full-time formal employment, this bond reflects the IDB’s “life cycle” approach to empowering Latin American and Caribbean countries to increase productivity and improve the social inclusion of young people throughout key intervention stages, as well as the bank’s commitment to the United Nations Millennium Development Goals.
It also reflects Citi Microfinance’s expanding inclusive finance role, building market solutions that result in greater access for low-income communities and sustainable returns for clients. Daiwa was a joint-bookrunner. It was priced with a spread of 54.7 basis points over the 1.00% UST due September 15, 2017. The pricing translates to a yield of 1.59%.
Unlike social impact bonds, which are contracts based on a pay-for-performance model, the EYE bond is an actual bond that will finance projects that provide outputs and results metrics. The IDB will track how programs are accomplishing these objectives, and investors will have access to the information on the IDB’s website.
In this way, the IDB and Citi Microfinance have adhered to certain green bond principles, including segregation of the proceeds to a separate account, tracking of the proceeds towards specific qualifying projects, and reporting on those proceeds on an annual basis.
“IDB’s EYE bond enables investors to participate in financing innovative projects that lead to increased social and economic inclusion of youth, including greater employment opportunities,” said Bob Annibale, Global Director of Citi Microfinance. “A range of institutional and mission-related investors, including foundations, pension funds and family offices, find the AAA-rated securities attractive because they align with their values, missions and risk guidelines.”
“The EYE bond is an innovative instrument designed to bring additional resources and awareness to bear on three key priorities for Latin America and the Caribbean,” said IDB President Luis Alberto Moreno. “The projects that will benefit from these investments will contribute to improving the quality of children’s education, increasing productivity and enhancing the skills of young people entering the job market.”
Eligible projects for the bond can include programs that focus on early childhood development, preschools and early childhood education, primary education, secondary education, compensatory education, teacher education and effectiveness, e-education, youth-at-risk, school-to-work transition, vocational and technical education, human resources and workforce development, labor intermediation systems, as well as vocational and workforce training.
“The relative value and focused use of proceeds made IDB’s initial EYE bond an attractive investment opportunity. In addition, we appreciate IDB’s clear and concise use of proceeds language and strong commitment to ongoing reporting on the projects funded through the EYE initiative,” said Stephen M. Liberatore, CFA, Managing Director/Portfolio Manager, TIAA-CREF Asset Management.
“Accion is committed to building a financially inclusive world in part through investments that achieve meaningful social impact and deliver an appropriate level of return and risk,” said Livingston Parsons, Chief Financial Officer, Accion. “Accion’s investment in this innovative EYE Bond—and long-standing partnership with the IDB—underscore our commitment to the IDB’s high-impact ‘life cycle’ programs that assist youth and families who are working towards a brighter future.”
“The IADB ‘EYE’ bond was structured and issued in response to demand for large and liquid SRI complaint fixed income products from investors across the globe, said Philip Brown, Managing Director, Capital Markets, Citi. “This is the first such dollar denominated development finance theme bond and I anticipate that there will be more to follow today’s success. Investor interest is growing fast and this bond provides a great platform to highlight the strength and scale of IADBs expertise in this area.”
This is the richest four-year bond issued by a multilateral development bank this year.
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The Inter-American Development Bank (IDB) is a multilateral financial institution supporting Latin America and the Caribbean’s efforts to reduce poverty and inequality, and to bring about development in a sustainable, climate-friendly way. Established in 1959, it is the leading source of development financing for Latin America and the Caribbean, with a strong commitment to achieving measurable results.
This press release is not an offer for sale of the securities of the Inter-American Development Bank (“IADB”). Any offering of IADB securities will be made only by means of a prospectus or other definitive offering document that contains important information about the securities, the offering and IADB. Offerings of securities will be made only in compliance with applicable laws.
Citi Public Affairs
John Ferriter (IDB)
KEYWORDS: Social Innovation and Entrepreneurship, Finance & Socially Responsible Investment, Citi, The Inter-American Development Bank (IDB or IADB), EYE Bond, Citi Microfinance, Education, Youth, Employment, Latin America