NDB in talks to provide billions in loan finance
The NDB’s vice-president and chief financial officer, Leslie Maasdorp, said the NDB’s chief role was in the funding of hard infrastructure, such as roads, ports and power stations, but its mandate did provide for the disbursement of loans to member countries in emergency situations.
On Thursday, the NDB, which is owned by five leading developing countries, including South Africa, raised its biggest bond yet - renminbi (RMB) 5billion (R13.4bn) - which was well oversubscribed in the China bond market. The bond will be used to provide $1bn (R19bn) in medical equipment, testing kits, ventilators and infrastructure in three regions that have been worst hit by the virus: Hubei, Guangdong and Henan provinces.
Maasdorp said in an interview on Friday that the success of the bond was an indication of the kind of support that the NDB was ready to provide its other member countries.
Brazil, China, India, South Africa and Russia are 20percent owners of the NDB, with each country contributing $2bn towards it when it was established in 2015.
Maasdorp said the emergency funding was made to China initially, because, although the number of new Covid-19 infections in that country was declining rapidly, its health system remained “very strained” in the three provinces.
In comparison, South Africa was in the early stages of the viral outbreak, but if the situation worsened materially, the bank would be able to raise similar finance for South Africa at a far lower cost than South Africa would be able to raise on capital markets.
This was because the NDB enjoyed a high investment grading - its AA+ credit rating ranks second only to the AAA rating which very few institutions have in the world - while South Africa’s junk status credit rating meant it has to pay relatively higher interest rates on its capital market loans.
The three-year RMB Coronavirus Combating Bond, issued in the China Interbank Bond Market, was the largest RMB-denominated bond issued by a multi-lateral bank in China.
The bond was priced at the lower end of the announced pricing range, and garnered interest from a high-quality, well-diversified investor base both from China and offshore.
“Since the outbreak of the Covid-19 disease in December 2019, the lives of people and the economy have been heavily impacted. The NDB is fully committed to supporting our member countries during this period of crisis to fight the spread of Covid-19 and stand ready to provide the necessary financing to this objective,” Maasdorp said.
The Coronavirus Combating Bond met an extraordinary demand from investors. The final order book was in excess of RMB15bn, more than three times oversubscribed.
“The funding from NDB will specifically provide much-needed emergency support during this period of crisis in our member countries, who are all facing new economic challenges and human hardship,” said Maasdorp.