World Bank raises $110 million with blockchain managed bond
Posted: 28 August 2018 | Source: Finextra
The Commonwealth Bank (CBA) has helped its client, the World Bank, launch bond-i - the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology.
CBA was mandated by the World Bank as arranger for the bond on August 10 and following a two-week consultation period with the market, the two-year bond has raised A$110 million.
Investors in the bond include CBA, First State Super, NSW Treasury Corporation, Northern Trust, QBE, SAFA, and Treasury Corporation of Victoria. CBA and the World Bank will continue to welcome investor interest in the bond throughout its life cycle, and enquiries from other market participants in relation to the platform.
James Wall, Executive General Manager of IB&M International, CBA said: “Since announcing the mandate, the interest we’ve received for bond-i has been overwhelming. It is clear the market is ready and open to the uptake of emerging technologies and sees the potential evolution of the capital markets. It has been a pleasure to work on such a ground-breaking transaction with a forward-thinking organisation like the World Bank.”
This launch also marks the first time that investors have supported the World Bank’s development activities in a transaction that is fully managed using the blockchain technology.
The ‘bond-i’ bond forms part of a broader strategic focus of the World Bank to harness the potential of disruptive technologies for development. In June 2017, the World Bank launched a Blockchain Innovation Lab to understand the impact of blockchain and other disruptive technologies in areas such as land administration, supply chain management, health, education, cross-border payments, and carbon market trading.
Arunma Oteh, World Bank Treasurer, said: “I am delighted that this pioneer bond transaction using the distributed ledger technology, bond-i, was extremely well received by investors. We are particularly impressed with the breath of interest from official institutions, fund managers, government institutions, and banks. We were no doubt successful in moving from concept to reality because these high-quality investors understood the value of leveraging technology for innovation in capital markets.
Our painstaking work, over the last year, and in partnership with Commonwealth Bank of Australia, was equally instrumental to the success of the transaction. Commendation also to our other service providers, King & Wood Mallesons, IHS Markit, Microsoft and Toronto Dominion Securities.
We welcome the huge interest that this transaction has generated from various stakeholders and will continue to seek ways to leverage emerging technologies to make capital markets more secure and efficient.”
Foundation investors in bond-i contributed to the project through their feedback on the platform structure and functionality.
Derek Yung, Chief Operating Officer - Group Investments, QBE Insurance Group Limited, said: “QBE welcomes the opportunity to participate in the world’s first global blockchain bond issue. QBE seeks to collaborate with innovative partners, and CBA together with the World Bank, are leading the way for bond issuance with this ground breaking blockchain platform. We believe there is untapped potential for the application of this product to capital markets and are pleased to be involved as an early investor.”
William Whitford, Managing Director, Treasury Corporation of Victoria, said: “TCV were proud to play a part in the first global blockchain bond. The opportunity to be involved in innovation like this is a privilege, and both CBA and the World Bank Treasury team are to be congratulated in their leadership in this space.”
The bond-i blockchain platform was built and developed by the CBA Blockchain Centre of Excellence, housed in the Sydney Innovation Lab. This project builds on the leadership and experience of CBA’s dedicated blockchain team, which has taken a lead role in applying blockchain technology to capital markets.
Service providers to the bond’s platform include TD Securities as market maker, IHS Markit as independent valuation provider, Microsoft as independent code reviewer, and King & Wood Mallesons as deal counsel.
bond-i transaction summary
Issuer: World Bank (International Bank for Reconstruction and Development, IBRD)
Issuer rating: Aaa/AAA
Amount: AUD 110 million
Settlement date: August 28, 2018
Maturity date: August 28, 2020
Coupon: 2.20% p.a. payable semi-annually in arrear
Coupon payments: 28th February and 27th August in each year
Re-offer price: 99.901%
Re-offer yield: 2.251% semi-annual
Denomination: AUD 1,000. The minimum consideration payable when issued in Australia: AUD 500,000
Lead manager: Commonwealth Bank of Australia