April 17, 2018 / 4:58 PM / in 8 days

IDA sells $1.5 bln note, its first issue, to help fund operations

NEW YORK, April 17 (Reuters) - The International Development Association (IDA), an arm of the World Bank, on Tuesday sold at a discount its first bond, a $1.5 billion 5-year note, at 19.6 basis points over the 5-year U.S. Treasury note.

The IDA, established in 1960, is dedicated to helping the world’s poorest countries with technical expertise, loans, grants and guarantees to boost economic growth.

The note has a coupon of 2.75 percent, pricing at 99.357 with a yield at 2.889 percent. The sale was heavily oversubscribed, with $4.6 billion in orders from more than 110 investors in 30 countries.

Until now the IDA had been funded by the 173 shareholder countries, the largest being the United States, Japan, Britain, Germany and France.

“We spent time reviewing IDA’s business model to make sure it’s not just fit for the donors but also fit for the market,” Arunma Oteh, treasurer at The World Bank, told reporters ahead of the sale.

“This is a way to scale up what IDA can do - to provide funds and leverage the capital markets so that IDA can do more,” Oteh said.

She said the proceeds will be used in infrastructure, health and education projects.

The IDA has $158.5 billion in equity on its balance sheet as of June 30, 2017. It has been funded via donor contributions, or what it calls replenishments, every three years with the last beginning in 2016. In late 2016 the IDA decided to change its funding structure to allow itself access to global capital markets.

The note, issued by IDA and listed in Luxemburg, was rated AAA/Aaa by both S&P Global Ratings and Moody’s Investors Service, and matures April 24, 2023.

JPMorgan, Barclays, BNP Paribas and Nomura were the lead managers. (Reporting by Rodrigo Campos; Additional reporting by Julian Baker in London; Editing by Daniel Bases and James Dalgleish)

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