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On January 13th, Agence Française de Développement (AFD) issued its first ever offshore Dominican Peso linked bond.
This first frontier currency transaction for AFD was structured, arranged and distributed by Morgan Stanley Europe SE and issued under AFD’s EMTN Debt Issuance Program. The Currency Exchange Fund (TCX) provided the hedge to AFD.
This issuance reflects AFD’s strategy to promote financing in frontier currencies and to act as a catalyzer for increased lending in DOP. TCX, one of the very few swap counterparties for DOP (and other frontier currencies) provided a hedge for the bond.
The lack of an established swap market creates difficulties for hedging local currency loans in frontier markets, such as Dominican Republic. This can be a constraint for the amount of lending AFD can provide to clients. By issuing this DOP linked bond and hedging the cash flows with TCX, AFD facilitates the creation of additional capacity for DOP linked lending and hedging.
The cashflows of the bond are calculated in DOP and settled in USD. It has a maturity of 3 years, a fixed rate coupon of 4% and a notional of DOP 290 Million, which is equivalent to USD 5 Million.
The bond will be listed in Euronext Paris.
Find out more about AFD's financial information o the investors page