REG - Inter-American Dev - Issue of Debt
09/04/2025 16:30
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RNS Number : 3711E Inter-American Development Bank 09 April 2025
PRICING SUPPLEMENT
Inter-American Development Bank
Global Debt Program
Series No.: 886
Tranche No.: 9
USD100,000,000 Floating Rate Notes due October 5, 2028 (the "Notes") as from
April 9, 2025, to be consolidated and form a single series with the Bank's
USD500,000,000 Floating Rate Notes due October 5, 2028, issued on October 5,
2023 (the "Series 886 Tranche 1 Notes"), the Bank's USD100,000,000 Floating
Rate Notes due October 5, 2028, issued on January 17, 2024 (the "Series 886
Tranche 2 Notes"), the Bank's USD200,000,000 Floating Rate Notes due October
5, 2028, issued on January 24, 2024 (the "Series 886 Tranche 3 Notes"), the
Bank's USD100,000,000 Floating Rate Notes due October 5, 2028, issued on
February 2, 2024 (the "Series 886 Tranche 4 Notes"), the Bank's USD100,000,000
Floating Rate Notes due October 5, 2028, issued on February 9, 2024 (the
"Series 886 Tranche 5 Notes"), the Bank's USD100,000,000 Floating Rate Notes
due October 5, 2028, issued on March 27, 2024 (the "Series 886 Tranche 6
Notes"), the Bank's USD100,000,000 Floating Rate Notes due October 5, 2028,
issued on September 20, 2024 (the "Series 886 Tranche 7 Notes") and the Bank's
USD100,000,000 Floating Rate Notes due October 5, 2028, issued on October 23,
2024 (the "Series 886 Tranche 8 Notes").
Issue Price: 100.233 percent plus 2 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
Deutsche Bank AG, London Branch
The date of this Pricing Supplement is April 7, 2025.
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.
MiFID II and UK MiFIR product governance / Retail investors, professional
investors and ECPs target market - See "General Information-Additional
Information Regarding the Notes-Matters relating to MiFID II and 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.: 886
Tranche No.: 9
2. Aggregate Principal Amount: USD100,000,000
As from the Issue Date, the Notes will be consolidated and form a single
series with the Series 886 Tranche 1 Notes, the Series 886 Tranche 2 Notes,
the Series 886 Tranche 3 Notes, the Series 886 Tranche 4 Notes, the Series 886
Tranche 5 Notes, the Series 886 Tranche 6 Notes, the Series 886 Tranche 7
Notes and the Series 886 Tranche 8 Notes.
3. Issue Price: USD100,259,000 which amount represents the sum of (a) 100.233 percent of the
Aggregate Principal Amount plus (b) the amount of USD26,000 representing 2
days' accrued interest, inclusive.
4. Issue Date: April 9, 2025
5. Form of Notes Book-entry only
(Condition 1(a)):
6. Authorized Denomination(s) USD1,000 and integral multiples thereof
(Condition 1(b)):
7. Specified Currency United States Dollars (USD) being the lawful currency of the United States of
(Condition 1(d)): America
8. Specified Principal Payment Currency USD
(Conditions 1(d) and 7(h)):
9. Specified Interest Payment Currency USD
(Conditions 1(d) and 7(h)):
10. Maturity Date
(Condition 6(a)):
October 5, 2028
11. Interest Basis Floating Interest Rate (Condition 5(II))
(Condition 5):
12. Interest Commencement Date April 7, 2025
(Condition 5(III)) :
13. Floating Rate (Condition 5(II)):
(a) Calculation Amount (if different than Principal Amount
of the Note):
Not Applicable
(b) Business Day Convention: Following Business Day Convention
(c) Specified Interest Period:
The period beginning on, and including, 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 Date: Quarterly in arrear on January 5, April 5, July 5, and October 5 in each year,
commencing on July 5, 2025, up to and including the Maturity Date.
Each Interest Payment Date is subject to adjustment in accordance with the
Business Day Convention (but, with respect to the Maturity Date, with no
adjustment to the amount of interest otherwise calculated).
(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-information.
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 Rate: 0 percent per annum
(a) Spread: plus (+) 0.35 percent per annum
(b) Floating Rate Day Count Fraction if not actual/360:
Actual/360
(c) 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 6(f)): No
19. Early Redemption Amount (including accrued interest, if applicable) (Condition
9):
In the event the Notes become due and payable as provided in Condition 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 Rate (Condition 5(II)) and "14. Other Floating
Rate Terms (Conditions 5(II) and (III)).
20. Governing Law: New York
Other Relevant Terms
1. Listing (if yes, specify Stock
Exchange):
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
2. Details of Clearance System Approved by the Bank and the
Global Agent and Clearance and
Settlement Procedures:
Federal Reserve Bank of New York; Euroclear Bank SA/NV; Clearstream Banking
S.A.
3. Syndicated: No
4. Commissions and Concessions: 0.007% of the Aggregate Principal Amount
5. Estimated Total Expenses: The Dealer has 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.
6. Codes:
(a) Common Code: 270021212
(b) ISIN: US45828RAA32
(c) CUSIP: 45828RAA3
7. Identity of Dealer: Deutsche Bank AG, London Branch
8. Additional Risk Factors: As set forth in the Supplemental Prospectus Information
9. 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: The Dealer 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: The Dealer represents, warrants and agrees, that it has not offered or sold
any Notes or caused the Notes to be made the subject of an invitation for
subscription or purchase and will not offer or sell any Notes or cause the
Notes to be made the subject of an invitation for subscription or purchase,
and has not circulated or distributed, nor will it circulate or distribute the
Prospectus, this Pricing Supplement or any other document or material in
connection with the offer or sale, or invitation for subscription or purchase,
of the Notes, whether directly or indirectly, to any person in Singapore other
than: (i) to an institutional investor (as defined in Section 4A of the SFA)
pursuant to Section 274 of the SFA or (ii) to an accredited investor (as
defined in Section 4A of the SFA) pursuant to and in accordance with the
conditions specified in Section 275 of the SFA and (where applicable)
Regulation 3 of the Securities and Futures (Classes of Investors) Regulations
2018 of Singapore.
Investors should note that there may be restrictions on the secondary sale of
the Notes under Section 276 of the SFA.
Any reference to the SFA is a reference to the Securities and Futures Act 2001
of Singapore and a reference to any term that is defined in the SFA or any
provision in the SFA is a reference to that term or provision as amended or
modified from time to time including by such of its subsidiary legislation as
may be applicable at the relevant time.
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 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, the Dealer 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.
General Information
Additional Information Regarding the Notes
1. Matters relating to MiFID II and UK MiFIR
The Bank does not fall under the scope of application of either the MiFID II
or the UK MiFIR regime. Consequently, the Bank does not qualify as an
"investment firm", "manufacturer" or "distributor" for the purposes of MiFID
II or UK MiFIR.
MiFID II product governance / Retail investors, professional investors and
ECPs target market - Solely for the purposes of the EU 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 eligible
counterparties, professional clients and retail clients, each as defined in
MiFID II; (ii) all channels for distribution to eligible counterparties and
professional clients are appropriate; and (iii) the following channels for
distribution of the Notes to retail clients are appropriate - investment
advice, portfolio management, non-advised sales and pure execution services,
subject to the distributor's suitability and appropriateness obligations under
MiFID II, as applicable. Any person subsequently offering, selling or
recommending the Notes (a "distributor") should take into consideration the EU
manufacturer's target market assessment; however, a distributor subject to
MiFID II is responsible for undertaking its own target market assessment in
respect of the Notes (by either adopting or refining the EU manufacturer's
target market assessment) and determining appropriate distribution channels.
For the purposes of this provision, the expression "EU
manufacturer" means the Dealer and the expression "MiFID II" means Directive
2014/65/EU, as amended.
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 the Dealer, (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.
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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