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iBonds or EYE Bonds?: Citi Talks EYE Bonds and Why They Stand Apart

By - Nov 13 2014

KidsiPods, iPhones, iPads, iBonds…wait what? With nearly everything tailored to the individual these days, it would be no surprise for a new “i” product to come along to improve the way we live.  The inspiration for this post, however, is not a new, custom-made innovative technology, but rather a mechanism for helping others on a grand scale.  Enter the EYE bond. In the company of so many trending bonds that aim to make a difference, including green bonds, development impact bonds, vaccination bonds and social impact bonds, what makes EYE bonds special? A chat with Citi’s Bob Annibale, Global Director of Community Development and Microfinance, delves into this and his insights on the future of bonds, partnerships and more.

Launched by the Inter-American Development Bank (IDB) in September 2014, the first issuance of the EYE bond program was priced by Citi as a $500 million four-year, fixed rate global bond.   The proceeds will finance IDB loans that build human capital in Latin America and the Caribbean (LAC) through early childhood care and education, formal primary and secondary education, and labor market placement and vocational training.

IDB:  The EYE bonds were purchased by 24 investors, including Accion International and the United Nations Development Programme (UNDP), both of which are long-time partners of the IDB but purchased IDB bonds for the first time through the EYE bond program.  Do you think this is the beginning of a trend in terms of diversification of participating investors? 

BA:  Absolutely. This was one of our goals for the EYE bond. Our aim was to showcase the IDB’s exceptional work promoting social equity in Latin America.  For example, we believed that if the offering was focused on educating investors about the IDB’s work in building human capital, then existing investors and a number of new investors would enthusiastically participate.

A broad range of institutional and mission-driven investors are looking for strong AAA-rated securities that align with their values, missions and risk guidelines. And in this case, they have the added knowledge that their investments are going to fund impactful work building human capital through education and employment. This theme bond aligns impact investors’ portfolios with the IDB’s mission to combat poverty in Latin America and the Caribbean.

Importantly, we think such theme bonds are replicable and could indeed become a trend. The EYE bond has established a product space for institutional investors to fund specific double-bottom line sectors, without sacrificing a market return.  This mirrors the growth in demand we are seeing from investors for SRI investments, both institutional and impact investors, as well as foundation and endowments.

Plus, because the EYE bond is funding a specific use of proceeds, there will be additional monitoring and reporting on the eligible projects through the life of the bond.  A few different members of the Citi team have remarked to me that it was a positive experience working with the IDB on this EYE offering, and we are looking forward to how much further we can push this innovation with the next theme issuance.

IDB: Innovation often requires internal partnerships. Within the IDB Group, we are combining the instruments and strengths of various offices to develop innovative financing structures that meet the needs of our clients and crowd in private investment.   Were any new internal partnerships needed at Citi to structure the first-of-its-kind EYE bond?

BA: Citi Microfinance regularly works across our company, including: our colleagues in Citi’s Capital Markets Origination team, which have long worked with the IDB; country officers in Latin America to Asia; our private bank; and so many others. In this case, the EYE bond came on the heels of months of partnership between the IDB and a wide array of teams across Citi.

Together with the IDB Treasury team, our Capital Markets Origination and Citi Microfinance groups jointly structured the EYE bond.  Although the bond carried the IDB’s full AAA credit rating, the bond was structured differently than a regular IDB bond with funds ring-fenced for specific project purposes in education, youth and employment.

Citi’s syndicate desk subsequently reached out to our investor base globally. Citi Private Bank also marketed this innovative development and socially-focused bond to clients, which was a new distribution network for the IDB.  Overall, this was a good example of seamless internal coordination on behalf of a key initiative.

 

Click here to read Part II of “iBonds or EYE Bonds?: Citi Talks EYE Bonds and Why They Stand Apart”

 

 

About Bob Annibale:

citiAs Global Director of Citi Community Development (CCD), Bob Annibale manages Citi’s partnerships with global, national and local organizations to support community development. CCD’s work focuses on responsible finance through financial capability and asset building; neighborhood preservation and revitalization; access to college education; and small business and microenterprise development. Working with Citi businesses and community partners, Citi strives to develop appropriate, innovative and sustainable products and services that contribute to expanding access to financial services. Bob also directs Citi Microfinance, which is globally responsible for Citi’s commercial relationships with microfinance institutions, networks and investors working across businesses and geographies to expand access to financial services in underserved communities.

 

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