Want to save the world and earn a juicy return at the same time?
The World Bank has got a bond to sell you.
The Bank has launched its first pandemic bond, raising funds to help developing countries combat infectious diseases. The sale raised $322m in two separate three-year bond issues, with the Bank also issuing $100m of swaps offering pandemic protection.
One of the bonds, priced at 6.5 per cent over six-month US Libor, will cover pandemic influenza and coronaviruses such as SARS, while the other, priced at 11.1 per cent over US Libor, will cover filoviruses such as Ebola, and several types of fever.
The bonds will pay investors a regular coupon, in exchange for which they lose some income or capital if a catastrophic infectious disease takes hold.
The proceeds will be channelled to developing countries facing a pandemic, and to charities and rescue organisations working in those countries, in a bid to tackle what the Bank regards as one of the greatest systemic risks facing the world.
The initiative was inspired by the 2013-4 Ebola outbreak in West Africa which killed 11,000 people, mostly in Guinea, Liberia and Sierra Leone.
International donors spent $7bn to fight the disease; if the affected countries had had access to finance in the early stages of the contagion only a tenth of those deaths would have occurred, the World Bank estimates.
The new pandemic bonds will be managed by the Bank’s Pandemic Emergency Financing Facility, which was unveiled last year.
Swiss Re acted as sole book-runner for the transaction. Swiss Re Capital Markets and Munich Re are the joint structuring agents. Munich Re and GC Securities, a division of MMC Securities LLC are co-managers.
Swiss Re Capital Markets Limited, Munich Re and GC Securities were also joint arrangers on the derivatives transactions.