'BRICS bank' returns to global capital markets after Russian invasion

The development bank of the BRICS emerging market nations has returned to capital markets with its first U.S. dollar bond issuance since Russia’s invasion of Ukraine, causing challenges for the China-based lender as Moscow is a major shareholder. The New Development Bank this week issued a $1.25 billion green bond. None of the money will be lent to Russia, which is facing a raft of international sanctions, said the bank’s Chief Financial Officer Leslie Maasdorp. “This is a major step forward because now we're starting a new journey,” he told Devex. Why it matters: After the invasion last February, investors were spooked somewhat because Moscow holds about 20% of the bank’s shares and faces tight sanctions. At times, NDB bonds faced illiquid trading conditions. The 7-year-old bank has worked for months to reassure investors it is a safe bet. The numbers: Maasdorp said that getting the bank back to market comes at a cost. “There is clearly a mispricing right now,” he said. Meaning, the bank is being charged a risk premium. “We are comfortable with where we are at now,” he said, as the key is to get back to markets. The effective yield on the bond at issuance was about 5.1%, more than 100 basis points higher than institutions such as the World Bank in its dollar-denominated bond offers this year. This also reflects the NDB’s AA rating versus the AAA held by the Washington-based lender. Who gets the money: The bond will only go to four of the BRICS — Brazil, India, China, and South Africa. Russia will not receive anything. The funds will support a range of projects, including climate-related programs like solar power, the bank said. There will also be refinancing of existing green projects. Who bought the bond: Some 78% of the bond buyers were official institutions, including central banks of various countries. Among them were the founding shareholders and countries in the Middle East.