CAF -development bank of Latin America- became the first Latin American issuer to place bonds under the SOFR (Secured Overnight Funding Rate), which has established itself as an alternative rate to replace the traditional LIBOR rate, which has been the market benchmark for the past decades and is in the process of being discontinued. The issue was for USD 400 million with a three-year maturity and a coupon of SOFR+62 basic points and was structured by JP Morgan.
"We are very satisfied with the confidence of investors in CAF's financial solvency and in attracting resources to support the countries' action plans to improve the wellbeing of the population and the economic reactivation of the region. We are also proud to be at the forefront of the markets, as this transaction positions us as the first issuer in Latin America to execute bonds with the SOFR rate," said Renny López, CAF's interim executive president.
With the disappearance of the LIBOR reference rate, which reflects the average interest rate at which a selection of banks lend to each other unhedged in the money market, SOFR emerges as an efficient alternative as it is used by banks to price dollar-denominated derivatives and loans, which is administered by the Federal Reserve Bank of New York, and published on the website http://www.newyorkfed.org.
For three decades, the Development Bank of Latin America has pursued a strategy of diversifying its sources of financing through an uninterrupted presence in global capital markets, which has placed it in a privileged position internationally. The multilateral promotes sustainable development and regional integration through the efficient mobilisation of resources for the timely provision of multiple, high value-added financial services to public and private sector clients in shareholder countries.
CAF closed 2020 with a record of more than $14 billion in loan approvals, mostly to address the effects of the pandemic on the economy and health 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 $200 billion in approvals since 1970 to promote sustainable development and regional integration.