TIDM42BI
RNS Number : 8471H
Inter-American Development Bank
29 November 2022
PRICING SUPPLEMENT
Inter-American Development Bank
Global Debt Program
Series No.: 809
Tranche No.: 10
USD 200,000,000 Floating Rate Notes due September 16, 2026 (the
"Notes") as from November 28, 2022, to be consolidated and form a
single series with the Bank's
USD 600,000,000 Floating Rate Notes due September 16, 2026,
issued on September 16, 2021 (the "Series 809 Tranche 1 Notes"),
the Bank's USD 100,000,000 Floating Rate Notes due September 16,
2026, issued on October 21, 2021 (the "Series 809 Tranche 2
Notes"), the Bank's USD 100,000,000 Floating Rate Notes due
September 16, 2026, issued on November 22, 2021 (the "Series 809
Tranche 3 Notes"), the Bank's USD 100,000,000 Floating Rate Notes
due September 16, 2026, issued on January 31, 2022 (the "Series 809
Tranche 4 Notes"), the Bank's USD 100,000,000 Floating Rate Notes
due September 16, 2026, issued on February 7, 2022 (the "Series 809
Tranche 5 Notes"), the Bank's USD 100,000,000 Floating Rate Notes
due September 16, 2026, issued on April 7, 2022 (the "Series 809
Tranche 6 Notes"), the Bank's USD 100,000,000 Floating Rate Notes
due September 16, 2026, issued on October 12, 2022 (the "Series 809
Tranche 7 Notes"), the Bank's USD 100,000,000 Floating Rate Notes
due September 16, 2026, issued on November 8, 2022 (the "Series 809
Tranche 8 Notes"), and the Bank's USD 100,000,000 Floating Rate
Notes due September 16, 2026, issued on November 17, 2022 (the
"Series 809 Tranche 9 Notes")
Issue Price: 99.474 percent plus 73 days' accrued interest
Application has been made for the Notes to be admitted to
the
Official List of the Financial Conduct Authority and
to trading on the London Stock Exchange plc's
UK Regulated Market
Barclays Bank PLC
RBC Capital Markets, LLC
The date of this Pricing Supplement is November 22, 2022
Terms used herein shall be deemed to be defined as such for the
purposes of the Terms and Conditions (the "Conditions") set forth
in the Prospectus dated July 28, 2020 (the "Prospectus") (which for
the avoidance of doubt does not constitute a prospectus for the
purposes of Part VI of the United Kingdom ("UK") Financial Services
and Markets Act 2000 or a base prospectus for the purposes of
Regulation (EU) 2017/1129 (as amended, the "Prospectus Regulation")
or the Prospectus Regulation as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 ("EUWA")). This
Pricing Supplement must be read in conjunction with the Prospectus.
This document is issued to give details of an issue by the
Inter-American Development Bank (the "Bank") under its Global Debt
Program and to provide information supplemental to the Prospectus.
Complete information in respect of the Bank and this offer of the
Notes is only available on the basis of the combination of this
Pricing Supplement and the Prospectus.
UK MiFIR product governance / Retail investors, professional
investors and ECPs target market - See "General
Information-Additional Information Regarding the Notes-Matters
relating to UK MiFIR" below.
Terms and Conditions
The following items under this heading "Terms and Conditions"
are the particular terms which relate to the issue the subject of
this Pricing Supplement. Together with the applicable Conditions
(as defined above), which are expressly incorporated hereto, these
are the only terms that form part of the form of Notes for such
issue.
1. Series No.: 809
Tranche No.: 10
2. Aggregate Principal Amount: USD 200,000,000
As from the Issue Date, the Notes
will be consolidated and form a
single series with the Series 809
Tranche 1 Notes, the Series 809
Tranche 2 Notes, the Series 809
Tranche 3 Notes, the Series 809
Tranche 4 Notes, the Series 809
Tranche 5 Notes, the Series 809
Tranche 6 Notes, the Series 809
Tranche 7 Notes, the Series 809
Tranche 8 Notes, and the Series
809 Tranche 9 Notes.
3. Issue Price: USD 200,256,000 which amount represents
the sum of (a) 99.474 percent of
the Aggregate Principal Amount
plus (b) the amount of USD 1,308,000
representing 73 days' accrued interest,
inclusive.
4. Issue Date: November 28, 2022
5. Form of Notes
(Condition 1(a)): Book-entry only
6. Authorized Denomination(s)
(Condition 1(b)): USD 1,000 and integral multiples
thereof
7. Specified Currency
(Condition 1(d)): United States Dollars (USD) being
the lawful currency of the United
States of America
8. Specified Principal Payment
Currency
(Conditions 1(d) and USD
7(h)):
9. Specified Interest Payment
Currency
(Conditions 1(d) and
7(h)): USD
10. Maturity Date
(Condition 6(a); Fixed
Interest Rate):
September 16, 2026
11. Interest Basis
(Condition 5): Floating Interest Rate (Condition
5(II))
12. Interest Commencement
Date September 16, 2022
(Condition 5(III)):
13. Floating Rate (Condition
5(II)):
(a) Calculation Amount Not Applicable
(if different than Principal
Amount of the Note):
(b) Business Day Convention: Following Business Day Convention
(c) Specified Interest The period beginning on, and including,
Period: the Interest Commencement Date
to, but excluding, the first Interest
Payment Date and each successive
period beginning on, and including,
an Interest Payment Date to, but
excluding, the next succeeding
Interest Payment Date, in each
case, as adjusted in accordance
with the relevant Business Day
Convention.
(d) Interest Payment Quarterly in arrear on March 16,
Date: June 16, September 16 and December
16 in each year, commencing on
December 16, 2022, up to and including
the Maturity Date.
Each Interest Payment Date is subject
to adjustment in accordance with
the Business Day Convention.
(e) Interest Period Date: Each Interest Payment Date
(f) Reference Rate: Subject to the Compounded SOFR
Fallback Provisions below, for
any Interest Period, "Compounded
SOFR" will be calculated by the
Calculation Agent on each Interest
Determination Date as follows and
the resulting percentage will be
rounded, if necessary, to the fourth
decimal place of a percentage point,
0.00005 being rounded upwards:
where:
"Observation Period" means, in
respect of each Interest Period,
the period from, and including,
the date which is five U.S. Government
Securities Business Days preceding
the first date of such Interest
Period to, but excluding, the date
which is five U.S. Government Securities
Business Days preceding the Interest
Payment Date for such Interest
Period (or in the final Interest
Period, the Maturity Date).
"SOFR Index(Start) " means the
SOFR Index value on the day which
is five U.S. Government Securities
Business Days preceding the first
date of the relevant Interest Period.
"SOFR Index(End) " means the SOFR
Index value on the day which is
five U.S. Government Securities
Business Days preceding the Interest
Payment Date relating to such Interest
Period (or in the final Interest
Period, the Maturity Date).
"d(c) " means the number of calendar
days in the Observation Period
relating to such Interest Period.
"SOFR Administrator" means the
Federal Reserve Bank of New York
("NY Fed") as administrator of
the secured overnight financing
rate ("SOFR") (or a successor administrator
of SOFR)
"SOFR Index" in relation to any
U.S. Government Securities Business
Day shall be the value published
by the SOFR Administrator on its
website (on or about 3:00 p.m.
(New York Time) on such U.S. Government
Securities Business Day (the "SOFR
Index Determination Time"). Currently,
the SOFR Administrator publishes
the SOFR Index on its website at
https://apps.newyorkfed.org/markets/autorates/sofr-avg-ind
. In the event that the value originally
published by the SOFR Administrator
on or about 3:00 p.m. (New York
Time) on any U.S. Government Securities
Business Day is subsequently corrected
and such corrected value is published
by the SOFR Administrator on the
original date of publication, then
such corrected value, instead of
the value that was originally published,
shall be deemed the SOFR Index
as of the SOFR Index Determination
Time in relation to such U.S. Government
Securities Business Day.
Compounded SOFR Fallback Provisions
:
SOFR Index Unavailable :
If a SOFR Index(Start) or SOFR
Index(End) is not published on
the associated Interest Determination
Date and a Benchmark Transition
Event and its related Benchmark
Replacement Date have not occurred
with respect to SOFR Index or SOFR,
"Compounded SOFR" means, for the
applicable Interest Period for
which such index is not available,
the rate of return on a daily compounded
interest investment calculated
by the Calculation Agent in accordance
with the formula for SOFR Averages,
and definitions required for such
formula, published on the SOFR
Administrator's website at
https://www.newyorkfed.org/markets/treasury-repo-reference-rates-inform
ation.
For the purposes of this provision,
references in the SOFR Averages
compounding formula and related
definitions to "calculation period"
shall be replaced with "Observation
Period" and the words "that is,
30-, 90-, or 180- calendar days"
shall be removed. If the daily
SOFR ("SOFR(i) ") does not so appear
for any day, "i" in the Observation
Period, SOFR(i) for such day "i"
shall be SOFR published in respect
of the first preceding U.S. Government
Securities Business Day for which
SOFR was published on the SOFR
Administrator's website.
Effect of a Benchmark Transition
Event :
If the Issuer determines on or
prior to the relevant Reference
Time that a Benchmark Transition
Event and its related Benchmark
Replacement Date have occurred
with respect to the then-current
Benchmark, the Benchmark Replacement
will replace the then-current Benchmark
for all purposes relating to the
Notes in respect of all determinations
on such date and for all determinations
on all subsequent dates.
In connection with the implementation
of a Benchmark Replacement, the
Issuer will have the right to make
Benchmark Replacement Conforming
Changes from time to time.
Any determination, decision or
election that may be made by the
Issuer pursuant to this section,
including any determination with
respect to a tenor, rate or adjustment
or of the occurrence or non-occurrence
of an event, circumstance or date
and any decision to take or refrain
from taking any action or any selection:
(1) will be conclusive and binding
absent manifest error;
(2) will be made in the sole discretion
of the Issuer; and
(3) notwithstanding anything to
the contrary in the documentation
relating to the Notes described
herein, shall become effective
without consent from the holders
of the Notes or any other party.
"Benchmark" means, initially, SOFR
Index; provided that if the Issuer
determines on or prior to the Reference
Time that a Benchmark Transition
Event and its related Benchmark
Replacement Date have occurred
with respect to SOFR Index (or
the published daily SOFR used in
the calculation thereof) then "Benchmark"
means the applicable Benchmark
Replacement for the SOFR Index;
and provided further that if the
Issuer determines on or prior to
the Reference Time that a Benchmark
Transition Event and its related
Benchmark Replacement Date have
occurred with respect to the then-current
Benchmark (or the daily published
component used in the calculation
thereof), then "Benchmark" means
the applicable Benchmark Replacement
for the then-current Benchmark.
"Benchmark Replacement" means the
first alternative set forth in
the order below that can be determined
by the Issuer as of the Benchmark
Replacement Date.
(1) the sum of: (a) the alternate
rate of interest that has been
selected or recommended by the
Relevant Governmental Body as the
replacement for the then-current
Benchmark and (b) the Benchmark
Replacement Adjustment;
(2) the sum of: (a) the ISDA Fallback
Rate and (b) the Benchmark Replacement
Adjustment; or
(3) the sum of: (a) the alternate
rate of interest that has been
selected by the Issuer as the replacement
for the then-current Benchmark
giving due consideration to any
industry-accepted rate of interest
as a replacement for the then-current
Benchmark for U.S. dollar-denominated
floating rate notes at such time
and (b) the Benchmark Replacement
Adjustment;
Provided that, if a Benchmark Replacement
Date has occurred with regard to
the daily published component used
in the calculation of a Benchmark,
but not with regard to the Benchmark
itself, "Benchmark Replacement"
means the references to the alternatives
determined in accordance with clauses
(1), (2) or (3) above for such
daily published components.
"Benchmark Replacement Adjustment"
means the first alternative set
forth in the order below that can
be determined by the Issuer as
of the Benchmark Replacement Date:
(1) the spread adjustment, or method
for calculating or determining
such spread adjustment, (which
may be a positive or negative value
or zero) that has been selected
or recommended by the Relevant
Governmental Body for the applicable
Unadjusted Benchmark Replacement;
(2) if the applicable Unadjusted
Benchmark Replacement is equivalent
to the ISDA Fallback Rate, the
ISDA Fallback Adjustment; or
(3) the spread adjustment (which
may be a positive or negative value
or zero) that has been selected
by the Issuer giving due consideration
to any industry-accepted spread
adjustment, or method for calculating
or determining such spread adjustment,
for the replacement of the then-current
Benchmark (or the daily published
component used in the calculation
thereof) with the applicable Unadjusted
Benchmark Replacement for U.S.
dollar-denominated floating rate
notes at such time.
"Benchmark Replacement Conforming
Changes" means, with respect to
any Benchmark Replacement, any
technical, administrative or operational
changes (including changes to the
timing and frequency of determining
rates and making payments of interest,
rounding of amounts or tenors,
and other administrative matters)
that the Issuer decides may be
appropriate to reflect the adoption
of such Benchmark Replacement in
a manner substantially consistent
with market practice (or, if the
Issuer decides that adoption of
any portion of such market practice
is not administratively feasible
or if the Issuer determines that
no market practice for use of the
Benchmark Replacement exists, in
such other manner as the Issuer
determines is reasonably necessary);
provided that, for the avoidance
of doubt, if a Benchmark Replacement
Date has occurred with regard to
the daily published component used
in the calculation of a Benchmark,
but not with regard to the Benchmark
itself, "Benchmark Replacement
Conforming Changes" shall also
mean that the Issuer may calculate
the Benchmark Replacement for such
Benchmark in accordance with the
formula for and method of calculating
such Benchmark last in effect prior
to Benchmark Replacement Date affecting
such component, substituting the
affected component with the relevant
Benchmark Replacement for such
component.
"Benchmark Replacement Date" means
the earliest to occur of the following
events with respect to the then-current
Benchmark (or the daily published
component used in the calculation
thereof):
(1) in the case of clause (1) or
(2) of the definition of "Benchmark
Transition Event," the later of
(a) the date of the public statement
or publication of information referenced
therein and (b) the date on which
the administrator of the Benchmark
permanently or indefinitely ceases
to provide the Benchmark (or such
component); or
(2) in the case of clause (3) of
the definition of "Benchmark Transition
Event," the later of (x) the date
of the public statement or publication
of information referenced therein
and (y) the first date on which
such Benchmark (or such component)
is no longer representative per
such statement or publication.
For the avoidance of doubt, if
the event that gives rise to the
Benchmark Replacement Date occurs
on the same day as, but earlier
than, the Reference Time in respect
of any determination, the Benchmark
Replacement Date will be deemed
to have occurred prior to the Reference
Time for such determination.
"Benchmark Transition Event" means
the occurrence of one or more of
the following events with respect
to the then-current Benchmark (or
the daily published component used
in the calculation thereof):
(1) a public statement or publication
of information by or on behalf
of the administrator of the Benchmark
(or such component) announcing
that such administrator has ceased
or will cease to provide the Benchmark
(or such component), permanently
or indefinitely, provided that,
at the time of such statement or
publication, there is no successor
administrator that will continue
to provide the Benchmark (or such
component); or
(2) a public statement or publication
of information by the regulatory
supervisor for the administrator
of the Benchmark (or such component),
the central bank for the currency
of the Benchmark (or such component),
an insolvency official with jurisdiction
over the administrator for the
Benchmark (or such component),
a resolution authority with jurisdiction
over the administrator for the
Benchmark (or such component) or
a court or an entity with similar
insolvency or resolution authority
over the administrator for the
Benchmark, which states that the
administrator of the Benchmark
(or such component) has ceased
or will cease to provide the Benchmark
(or such component) permanently
or indefinitely, provided that,
at the time of such statement or
publication, there is no successor
administrator that will continue
to provide the Benchmark (or such
component); or
(3) a public statement or publication
of information by the regulatory
supervisor for the administrator
of the Benchmark announcing (A)
that such Benchmark (or its component)
is no longer, or as of a specified
future date will no longer be,
capable of being representative,
or is non-representative, of the
underlying market and economic
reality that such Benchmark (or
its component) is intended to measure
as required by applicable law or
regulation and as determined by
the regulatory supervisor in accordance
with applicable law or regulation
and (B) that the intention of that
statement or publication is to
engage contractual triggers for
fallbacks activated by pre-cessation
announcements by such supervisor
(howsoever described) in contracts.
"ISDA Definitions" means the 2006
ISDA Definitions published by the
International Swaps and Derivatives
Association, Inc. or any successor
thereto, as amended or supplemented
from time to time, or any successor
definitional booklet for interest
rate derivatives published from
time to time.
"ISDA Fallback Adjustment" means
the spread adjustment (which may
be a positive or negative value
or zero) that would apply for derivatives
transactions referencing the ISDA
Definitions to be determined upon
the occurrence of an index cessation
event with respect to the Benchmark
(or the daily published component
used in the calculation thereof).
"ISDA Fallback Rate" means the
rate that would apply for derivatives
transactions referencing the ISDA
Definitions to be effective upon
the occurrence of an index cessation
date with respect to the Benchmark
(or the daily published component
used in the calculation thereof)
for the applicable tenor excluding
the applicable ISDA Fallback Adjustment.
"Reference Time" with respect to
any determination of the Benchmark
(or the daily published component
used in the calculation thereof)
means (1) if the Benchmark is SOFR
Index, the SOFR Index Determination
Time, and (2) if the Benchmark
is not SOFR Index, the time determined
by the Issuer after giving effect
to the Benchmark Replacement Conforming
Changes.
"Relevant Governmental Body" means
the Federal Reserve Board and/or
the Federal Reserve Bank of New
York, or a committee officially
endorsed or convened by the Federal
Reserve Board and/or the Federal
Reserve Bank of New York or any
successor thereto.
"Unadjusted Benchmark Replacement"
means the Benchmark Replacement
excluding the Benchmark Replacement
Adjustment.
(g) Calculation Agent: Citibank, N.A., London Branch
(h) Interest Determination
Date: The date five U.S. Government Securities
Business Days prior to the end
of each Interest Period.
14. Other Floating Rate Terms
(Conditions 5(II) and
(III)):
(a) Minimum Interest 0 percent per annum
Rate:
(b) Spread: plus (+) 0.17 percent per annum
(c) Floating Rate Day
Count Fraction if not
actual/360: Actual/360
(d) Relevant Banking
Center: New York
15. Relevant Financial Center: New York
16. Relevant Business Day: A day which is a U.S. Government
Securities Business Day and a New
York Business Day.
17. Issuer's Optional Redemption
(Condition 6(e)): No
18. Redemption at the Option
of the Noteholders (Condition No
6(f)):
19. Early Redemption Amount
(including accrued interest, In the event the Notes become due
if applicable) (Condition and payable as provided in Condition
9): 9 (Default), the Early Redemption
Amount with respect to the minimum
Authorized Denomination will be
USD1,000 plus accrued interest,
if any, as determined in accordance
with "13. Floating Interest Rate
(Condition 5(II)) and "14. Other
Floating Interest Rate Terms (Conditions
5(II) and (III)).
20. Governing Law: New York
Other Relevant Terms
1. Listing (if yes, specify
Stock Application has been made for the
Exchange): Notes to be admitted to the Official
List of the Financial Conduct Authority
and to trading on the London Stock
Exchange plc's UK Regulated Market
2. Details of Clearance
System Approved by the
Bank and the
Global Agent and Clearance Federal Reserve Bank of New York;
and Euroclear Bank SA/NV; Clearstream
Settlement Procedures: Banking S.A.
3. Syndicated: Yes
4. If Syndicated:
(a) Liability: Several and not joint
(b) Lead Managers: Barclays Bank PLC
RBC Capital Markets, LLC
5. Commissions and Concessions: 0.0035% of the Aggregate Principal
Amount
6. Estimated Total Expenses: The Managers have agreed to pay
for all material expenses related
to the issuance of the Notes, except
the Issuer will pay for the London
Stock Exchange listing fees, if
applicable.
7. Codes:
(a) Common Code: 238744717
(b) ISIN: US4581X0DY17
(c) CUSIP: 4581X0DY1
8. Identity of Managers: Barclays Bank PLC
RBC Capital Markets, LLC
9. Intended to be held in Not Applicable
a manner which would
allow Eurosystem eligibility:
10. Additional Risk Factors: As set forth in the Supplemental
Prospectus Information
11. Selling Restrictions:
(a) United States: Under the provisions of Section
11(a) of the Inter-American Development
Bank Act, the Notes are exempted
securities within the meaning of
Section 3(a)(2) of the U.S. Securities
Act of 1933, as amended, and Section
3(a)(12) of the U.S. Securities
Exchange Act of 1934, as amended.
(b) United Kingdom: Each of the Managers represents
and agrees that (a) it has only
communicated or caused to be communicated
and will only communicate or cause
to be communicated an invitation
or inducement to engage in investment
activity (within the meaning of
Section 21 of the Financial Services
and Markets Act 2000 (the "FSMA"))
received by it in connection with
the issue or sale of the Notes
in circumstances in which Section
21(1) of the FSMA does not apply
to the Bank, and (b) it has complied
and will comply with all applicable
provisions of the FSMA with respect
to anything done by it in relation
to such Notes in, from or otherwise
involving the UK.
(c) Singapore: In the case of the Notes being
offered into Singapore in a primary
or subsequent distribution, and
solely for the purposes of its
obligations pursuant to Section
309B of the Securities and Futures
Act (Chapter 289) of Singapore
(the "SFA"), the Issuer has determined,
and hereby notifies all relevant
persons (as defined in Section
309A of the SFA) that the Notes
are "prescribed capital markets
products" (as defined in the Securities
and Futures (Capital Markets Products)
Regulations 2018 of Singapore)
and Excluded Investment Products
(as defined in MAS Notice SFA 04-N12:
Notice on the Sale of Investment
Products and MAS Notice FAA-N16:
Notice on Recommendations on Investment
Products).
(d) General: No action has been or will be taken
by the Issuer that would permit
a public offering of the Notes,
or possession or distribution of
any offering material relating
to the Notes in any jurisdiction
where action for that purpose is
required. Accordingly, each of
the Managers agrees that it will
observe all applicable provisions
of law in each jurisdiction in
or from which it may offer or sell
Notes or distribute any offering
material.
Recent Developments
On September 26, 2022, the Board of Governors of the
Inter-American Development Bank (IDB) resolved that Mr. Mauricio
Claver-Carone would cease to hold the office of President of the
Bank, effective on that day. In accordance with the Bank's Charter,
the Executive Vice President, Reina Irene Mejía Chacón, is serving
as President a.i. On November 20, 2022, Ilan Goldfajn was elected
president of the Bank during a Special Meeting of the Bank's Board
of Governors. Mr. Goldfajn will take office for a five-year term on
December 19, 2022.
General Information
Additional Information Regarding the Notes
1. Matters relating to UK MiFIR
The Bank does not fall under the scope of application of the UK
MiFIR regime. Consequently, the Bank does not qualify as an
"investment firm", "manufacturer" or "distributor" for the purposes
of UK MiFIR.
UK MiFIR product governance / Retail investors, professional
investors and ECPs target market - Solely for the purposes of the
UK manufacturer's product approval process, the target market
assessment in respect of the Notes has led to the conclusion that:
(i) the target market for the Notes is retail clients, as defined
in point (8) of Article 2 of Regulation (EU) No 2017/565 as it
forms part of UK domestic law by virtue of the EUWA, eligible
counterparties, as defined in COBS, and professional clients, as
defined in UK MiFIR; and (ii) all channels for distribution of the
Notes are appropriate. Any person subsequently offering, selling or
recommending the Notes (a "distributor") should take into
consideration the UK manufacturer's target market assessment;
however, a distributor subject to the UK MiFIR Product Governance
Rules is responsible for undertaking its own target market
assessment in respect of the Notes (by either adopting or refining
the UK manufacturer's target market assessment) and determining
appropriate distribution channels.
For the purposes of this provision, (i) the expression "UK
manufacturer" means Barclays Bank PLC, (ii) the expression "COBS"
means the FCA Handbook Conduct of Business Sourcebook, (iii) the
expression "UK MiFIR" means Regulation (EU) No 600/2014 as it forms
part of UK domestic law by virtue of the EUWA and (iv) the
expression "UK MiFIR Product Governance Rules" means the FCA
Handbook Product Intervention and Product Governance
Sourcebook.
2. Supplemental Prospectus Information
The Prospectus is hereby supplemented with the following
information, which shall be deemed to be incorporated in, and to
form part of, the Prospectus.
The Prospectus and this Pricing Supplement do not describe all
of the risks and other ramifications of an investment in the Notes.
An investment in the Notes entails risks not associated with an
investment in a conventional fixed rate or floating rate debt
security. Investors should consult their own financial and legal
advisors about the risks associated with an investment in the Notes
and the suitability of investing in the Notes in light of their
particular circumstances, and possible scenarios for economic,
interest rate and other factors that may affect their investment
.
The Secured Overnight Financing Rate is a Relatively New
Reference Rate and its Composition and Characteristics are Not the
Same as LIBOR.
On June 22, 2017, the Alternative Reference Rates Committee
("ARRC") convened by the Board of Governors of the Federal Reserve
System and the Federal Reserve Bank of New York identified the
Secured Overnight Financing Rate ("SOFR") as the rate that, in the
consensus view of the ARRC, represented best practice for use in
certain new U.S. dollar derivatives and other financial contracts.
SOFR is a broad measure of the cost of borrowing cash overnight
collateralized by U.S. treasury securities, and has been published
by the Federal Reserve Bank of New York since April 2018. The
Federal Reserve Bank of New York has also begun publishing
historical indicative SOFR from 2014. Investors should not rely on
any historical changes or trends in SOFR as an indicator of future
changes in SOFR.
The composition and characteristics of SOFR are not the same as
those of LIBOR, and SOFR is fundamentally different from LIBOR for
two key reasons. First, SOFR is a secured rate, while LIBOR is an
unsecured rate. Second, SOFR is an overnight rate, while LIBOR is a
forward-looking rate that represents interbank funding over
different maturities (e.g., three months). As a result, there can
be no assurance that SOFR (including Compounded SOFR) will perform
in the same way as LIBOR would have at any time, including, without
limitation, as a result of changes in interest and yield rates in
the market, market volatility or global or regional economic,
financial, political, regulatory, judicial or other events.
SOFR May be More Volatile Than Other Benchmark or Market
Rates.
Since the initial publication of SOFR, daily changes in SOFR
have, on occasion, been more volatile than daily changes in other
benchmark or market rates, such as USD LIBOR. Although changes in
Compounded SOFR generally are not expected to be as volatile as
changes in daily levels of SOFR, the return on and value of the
Notes may fluctuate more than floating rate securities that are
linked to less volatile rates. In addition, the volatility of SOFR
has reflected the underlying volatility of the overnight U.S.
Treasury repo market. The Federal Reserve Bank of New York has at
times conducted operations in the overnight U.S. Treasury repo
market in order to help maintain the federal funds rate within a
target range. There can be no assurance that the Federal Reserve
Bank of New York will continue to conduct such operations in the
future, and the duration and extent of any such operations is
inherently uncertain. The effect of any such operations, or of the
cessation of such operations to the extent they are commenced, is
uncertain and could be materially adverse to investors in the
Notes.
Any Failure of SOFR to Gain Market Acceptance Could Adversely
Affect the Notes.
According to the ARRC, SOFR was developed for use in certain
U.S. dollar derivatives and other financial contracts as an
alternative to USD LIBOR in part because it is considered a good
representation of general funding conditions in the overnight U.S.
Treasury repurchase agreement market. However, as a rate based on
transactions secured by U.S. Treasury securities, it does not
measure bank-specific credit risk and, as a result, is less likely
to correlate with the unsecured short-term funding costs of banks.
This may mean that market participants would not consider SOFR a
suitable replacement or successor for all of the purposes for which
USD LIBOR historically has been used (including, without
limitation, as a representation of the unsecured short-term funding
costs of banks), which may, in turn, lessen market acceptance of
SOFR. Any failure of SOFR to gain market acceptance could adversely
affect the return on and value of the Notes and the price at which
investors can sell the Notes in the secondary market.
In addition, if SOFR does not prove to be widely used as a
benchmark in securities that are similar or comparable to the
Notes, the trading price of the Notes may be lower than those of
securities that are linked to rates that are more widely used.
Similarly, market terms for floating-rate debt securities linked to
SOFR, such as the spread over the base rate reflected in interest
rate provisions or the manner of compounding the base rate, may
evolve over time, and trading prices of the Notes may be lower than
those of later-issued SOFR-based debt securities as a result.
Investors in the Notes may not be able to sell the Notes at all or
may not be able to sell the Notes at prices that will provide them
with a yield comparable to similar investments that have a
developed secondary market, and may consequently suffer from
increased pricing volatility and market risk.
The Rate of Interest on the Notes is Based on a Compounded SOFR
Rate and the SOFR Index, which is Relatively New in the
Marketplace.
For each Interest Period, the Rate of Interest on the Notes is
based on Compounded SOFR, which is calculated using the SOFR Index
published by the Federal Reserve Bank of New York according to the
specific formula described in paragraph 13 under "Terms and
Conditions" above (the "Floating Rate Note Provisions"), not the
SOFR rate published on or in respect of a particular date during
such Interest Period or an arithmetic average of SOFR rates during
such period. For this and other reasons, the Rate of Interest on
the Notes during any Interest Period will not necessarily be the
same as the Rate of Interest on other SOFR-linked investments that
use an alternative basis to determine the applicable interest rate.
Further, if the SOFR rate in respect of a particular date during an
Interest Period is negative, its contribution to the SOFR Index
will be less than one, resulting in a reduction to Compounded SOFR
used to calculate the interest payable on the Notes on the Interest
Payment Date for such Interest Period.
Very limited market precedent exists for securities that use
SOFR as the interest rate and the method for calculating an
interest rate based upon SOFR in those precedents varies. In
addition, the Federal Reserve Bank of New York only began
publishing the SOFR Index on March 2, 2020. Accordingly, the use of
the SOFR Index or the specific formula for the Compounded SOFR rate
used in the Notes may not be widely adopted by other market
participants, if at all. If the market adopts a different
calculation method, that would likely adversely affect the market
value of the Notes.
Compounded SOFR with Respect to a Particular Interest Period
Will Only be Capable of Being Determined Near the End of the
Relevant Interest Period.
The level of Compounded SOFR applicable to a particular Interest
Period and, therefore, the amount of interest payable with respect
to such Interest Period will be determined on the Interest
Determination Date for such Interest Period. Because each such date
is near the end of such Interest Period, you will not know the
amount of interest payable with respect to a particular Interest
Period until shortly prior to the related Interest Payment Date and
it may be difficult for you to reliably estimate the amount of
interest that will be payable on each such Interest Payment Date.
In addition, some investors may be unwilling or unable to trade the
Notes without changes to their information technology systems, both
of which could adversely impact the liquidity and trading price of
the Notes.
The SOFR Index May be Modified or Discontinued and the Notes May
Bear Interest by Reference to a Rate Other than Compounded SOFR,
which Could Adversely Affect the Value of the Notes.
The SOFR Index is published by the Federal Reserve Bank of New
York based on data received by it from sources other than the
Issuer, and the Issuer has no control over its methods of
calculation, publication schedule, rate revision practices or
availability of the SOFR Index at any time. There can be no
guarantee, particularly given its relatively recent introduction,
that the SOFR Index will not be discontinued or fundamentally
altered in a manner that is materially adverse to the interests of
investors in the Notes. If the manner in which the SOFR Index is
calculated, including the manner in which SOFR is calculated, is
changed, that change may result in a reduction in the amount of
interest payable on the Notes and the trading prices of the Notes.
In addition, the Federal Reserve Bank of New York may withdraw,
modify or amend the published SOFR Index or SOFR data in its sole
discretion and without notice. The Rate of Interest for any
Interest Period will not be adjusted for any modifications or
amendments to the SOFR Index or SOFR data that the Federal Reserve
Bank of New York may publish after the Rate of Interest for that
Interest Period has been determined.
If the Issuer determines that a Benchmark Transition Event and
its related Benchmark Replacement Date have occurred in respect of
the SOFR Index or SOFR itself, then the Rate of Interest on the
Notes will no longer be determined by reference to the SOFR Index,
but instead will be determined by reference to a different rate,
plus a spread adjustment, which we refer to as a "Benchmark
Replacement," as further described in the Floating Rate Note
Provisions.
If a particular Benchmark Replacement or Benchmark Replacement
Adjustment cannot be determined, then the next-available Benchmark
Replacement or Benchmark Replacement Adjustment will apply. These
replacement rates and adjustments may be selected, recommended or
formulated by (i) the Relevant Governmental Body (such as the
ARRC), (ii) the International Swaps and Derivatives Association
("ISDA") or (iii) in certain circumstances, the Issuer itself. In
addition, the terms of the Notes expressly authorize the Issuer to
make Benchmark Replacement Conforming Changes with respect to,
among other things, changes to the definition of "Interest Period",
the timing and frequency of determining rates and making payments
of interest and other administrative matters. The determination of
a Benchmark Replacement, the calculation of the Rate of Interest on
the Notes by reference to a Benchmark Replacement (including the
application of a Benchmark Replacement Adjustment), any
implementation of Benchmark Replacement Conforming Changes and any
other determinations, decisions or elections that may be made under
the terms of the Notes in connection with a Benchmark Transition
Event, could adversely affect the value of the Notes, the return on
the Notes and the price at which you can sell such Notes.
In addition, (i) the composition and characteristics of the
Benchmark Replacement will not be the same as those of Compounded
SOFR, the Benchmark Replacement may not be the economic equivalent
of Compounded SOFR, there can be no assurance that the Benchmark
Replacement will perform in the same way as Compounded SOFR would
have at any time and there is no guarantee that the Benchmark
Replacement will be a comparable substitute for Compounded SOFR
(each of which means that a Benchmark Transition Event could
adversely affect the value of the Notes, the return on the Notes
and the price at which you can sell the Notes), (ii) any failure of
the Benchmark Replacement to gain market acceptance could adversely
affect the Notes, (iii) the Benchmark Replacement may have a very
limited history and the future performance of the Benchmark
Replacement may not be predicted based on historical performance,
(iv) the secondary trading market for Notes linked to the Benchmark
Replacement may be limited and (v) the administrator of the
Benchmark Replacement may make changes that could change the value
of the Benchmark Replacement or discontinue the Benchmark
Replacement and has no obligation to consider your interests in
doing so.
The Calculation Agent Will Make Determinations with respect to
the Notes, and the Issuer May Exercise Subjective Discretion with
respect to Compounded SOFR or Replacements Thereof.
The Calculation Agent will make certain determinations with
respect to the Notes as further described under the Floating Rate
Note Provisions, some of which determinations are in the
Calculation Agent's sole discretion. Any determination, decision or
election pursuant to the benchmark replacement provisions will be
made by the Issuer. Any of these determinations may adversely
affect the value of the Notes, the return on the Notes and the
price at which you can sell such Notes. Moreover, certain
determinations to be made by the Issuer may require the exercise of
discretion and the making of subjective judgments, such as with
respect to Compounded SOFR or the occurrence or non-occurrence of a
Benchmark Transition Event and any Benchmark Replacement Conforming
Changes. These potentially subjective determinations may adversely
affect the value of the Notes, the return on the Notes and the
price at which you can sell such Notes .
INTER-AMERICAN DEVELOPMENT BANK
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