CAF launches first Covid-19 Response Bond in Latin America - BNP Paribas CIB
 
Tuesday 09 June 2020

In late May, Corporación Andina de Fomento, the Development Bank of Latin America, issued its first Covid-19 Response Bond.


In late May, Corporación Andina de Fomento (CAF), the Development Bank of Latin America, issued Latin America's first Covid-19 Response Bond, a €700 million (c.$771 million) five-year social bond to support its member countries' Covid-19-related relief and recovery costs.

The deal marks CAF's debut transaction from its recently established Social Bond Framework, and is also its first EUR benchmark of 2020, following a 7-year EUR denominated green benchmark issued in November 2019. (BNP Paribas was lead bookrunner for both inaugural transactions.)

The use of proceeds will be allocated to healthcare system and emergency economic support to tackle the Covid-19 crisis, including:

  • Medical supplies and equipment, virus testing and healthcare infrastructure construction and expansion
  • Research and development for vaccines and treatments, as well as other costs related to preventative care, education and mental health support in relation to Covid-19
  • Financial assistance for micro, and small and medium-sized enterprises, particularly those in sectors most impacted by the pandemic (such as hospitality, tourism, retail and transport)
  • Other economic recovery initiatives geared at underserved populations, such as preferential interest rate loans, credit facilities, grants, poverty alleviation and employment programmes.

"The issuance of this bond adds to the efforts we are making to support the countries of the region to respond efficiently to the health and economic emergency generated by Covid-19. Attracting international funds to Latin America is one of the best tools to deal with this crisis, and demonstrates the confidence of international investors in CAF," said the CEO of CAF, Luis Carranza.

Recognising the need for support from its shareholder countries in coping with the economic and health effects of Covid-19, CAF accelerated its social bond programmes while launching a number of Covid-19 relief initiatives. The bank developed an emergency credit line for the rapid disbursement of up to $2.5 billion to support and complement the fiscal measures that shareholder country governments are applying to contain the pandemic and alleviate the economic fallout. A contingent credit line of up to $300 million was established to provide direct support for public health systems.

The Covid-19 Response Bond space is still very new, with just a handful of issuers following this format. The rapid creation and implementation of the framework reflects CAF's commitment to fighting the crisis and the strength of its ties to the ESG community as a pioneer in the development of the sustainable bond market in Latin America.



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