AFC closes $500mn in debut hybrid bond to fund critical projects

The Africa Finance Corporation (AFC) has successfully secured a $500 million hybrid bond in its debut issuance. The bond is expected to finance transformative infrastructure projects across the continent, marking a significant milestone for the AFC. Banji Fehintola, Executive Board Member and Head of Financial Services at AFC, discussed the details of this transaction in a recent interview with CNBC Africa. The hybrid bond issuance, valued at $500 million, was considered a benchmark in the international bond market. The transaction was the result of extensive collaboration with leading banks such as MUFG, JP Morgan, Bank of America, Emirates, MBD, Mashreq, and Societe Generale. The bond was well-received by global investors, with a subscription volume exceeding expectations by 150%. This success demonstrates a growing confidence in hybrid bonds as a financial tool for multilateral development banks. The proceeds from the bond issuance will be utilized for general corporate purposes, focusing primarily on infrastructure finance. AFC, established to support Africa's industrialization and bridge the infrastructure deficit, has a robust pipeline of projects lined up for funding. These projects span across various countries in Africa and signify a busy period ahead for the AFC team. One of the key projects in the AFC's portfolio is the Lobito Corridor Rail project, a significant infrastructure initiative with the potential to connect the Atlantic Ocean to the Indian Ocean. This project, developed in collaboration with the United States, the European Commission, and the government of Italy, is expected to have far-reaching impacts on transportation and value addition for critical minerals across several African countries. Additionally, AFC is actively involved in the Arise integrated industrial projects, aimed at supporting industrialization strategies in multiple African nations. The corporation is also a major player in the renewable energy sector, owning significant renewable energy assets in Africa. Projects in the renewable energy space, such as those in Stockholm, have the potential to supply a substantial portion of the UK's energy needs. The successful issuance of the hybrid bond not only provides additional financial capacity for AFC but also enables leveraging opportunities for further investments. With a favorable AAA rating from S&P, AFC's capital position is solidified, enhancing its credibility and opening up new avenues for funding sources. The corporation is exploring various financing instruments and markets, including potential access to the deep China bond market through Panda bond issuance, to diversify its funding sources and ensure cost-effective financing for its mission. In conclusion, the AFC's $500 million hybrid bond issuance marks a significant step towards funding critical infrastructure projects across Africa. The corporation's strategic approach to diversifying funding sources and leveraging financial instruments underscores its commitment to driving sustainable development and economic growth on the continent.