The World Bank launched bond-i (blockchain operated new debt instrument), the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology. The two-year bond raised A$110 million, marking 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 World Bank mandated Commonwealth Bank of Australia (CBA) as arranger for the bond on August 10. The announcement was followed by a two-week consultation period with the market, with key investors indicating strong support for the issuance.
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 inquiries from other market participants in relation to the platform.
The bond is 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, 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.”
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.
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 organization like the World Bank.”
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.”
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.
The World Bank issues between US$50-US$60 billion annually in bonds for sustainable development. It has a 70-year track record of innovation in the capital markets. Among its pioneering issuances are the first bond in global format – a globally traded and settled bond issued in September 1989 – and the first e-bond, a fully integrated electronic bond issued in January 2000. As a frequent issuer in the Australian dollar market, it has since 1986 raised nearly A$60 billion from investors globally.
|bond-i transaction summary|
|Issuer:||World Bank (International Bank for Reconstruction and Development, IBRD)|
|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 28th August in each year|
|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|
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization. Created in 1944, it is the original member of the World Bank Group and operates as a global development cooperative owned by 189 nations.
The World Bank provides loans, guarantees, risk management products, and advisory services to middle-income and other creditworthy countries to support the Sustainable Development Goals and to end extreme poverty and promote shared prosperity. It also provides leadership to coordinate regional and global responses to development challenges.
The World Bank has been issuing sustainable development bonds in the international capital markets for over 70 years to fund programs and activities that achieve a positive impact. More information on World Bank bonds is available at www.worldbank.org/debtsecurities.
Since our beginnings in 1911 as a bank for Australian families, Commonwealth Bank of Australia Group has been providing financial services for people, businesses and communities across the country.
Today, we have grown to become one of the world’s leading financial institutions. We employ more than 51,000 people around the world. We have more than 800,000 direct shareholders with many more who own shares through their superannuation or retirement plans.
Source: The World Bank