On November 18th, FMO, the Dutch Development Bank, issued an offshore CFA Franc (XOF) linked bond.
This transaction follows last week’s Tajik Somoni transaction and deals in Zambian Kwacha and Kyrgyzstan Som earlier in the year. The deal was structured, arranged and distributed by ING and issued under FMO’s Debt Issuance Program. The Currency Exchange Fund (TCX) provided a hedge to FMO. The repeat issuance of local currency linked bonds reflects FMO’s strategy to promote financing in frontier currencies.
The CFA Franc is the official currency of 8 countries in West Africa. The recent positive economic developments in the region and in specific countries in particular have raised the demand for financing in XOF. With this bond issuance FMO acts as a catalyser for increased lending in XOF. TCX, the only swap provider for long dated XOF provided a hedge for the bond issue. By issuing this XOF linked bond and hedging the cash flows with TCX, FMO facilitates the creation of additional capacity for XOF linked lending and hedging.
FMO is pursuing opportunities, including potential transactions in XOF, to increase its financing in West Africa where it has a healthy portfolio of investments in the microfinance sector, (renewable) energy sector and other companies. FMO invests in sectors where it believes its contributions has the highest long-term impact: financial institutions, energy and agribusiness. Alongside partners, FMO invests in the infrastructure, manufacturing and services sectors. This sustains FMO’s mission to help entrepreneurs build a better world.
The cash flows of this XOF linked bond are calculated in XOF and settled in EUR. The bond has a maturity of 5 years, a fixed rate coupon of 3.0% and a notional of EUR 4.5 million, which is equivalent to XOF 2.95 billion. The bond will be listed in Luxembourg.
