American multinational investment bank Bank of America recently issued a corporate social bond worth $1 billion to help support the fight against the COVID-19 pandemic. The bond issuance, which was announced in May, is the first offering of its kind from a U.S. commercial bank.
The offering made by the Charlotte, North Carolina-based lender, is a 4-year bond that is callable in 3 years. It involves a fixed semi-annual interest rate of 1.486% for the first three years. The interest will then shift to a quarterly floating rate after the said period.
This is the 7th bond issued by the Bank of America that falls under the environmental, social, and governance (ESG) theme since 2013. In the past, the lender has issued 5 “green” bonds, which were focused on providing clean energy. They have also issued a “social” bond intended to support community development financial institutions (CDFIs) and affordable housing.
For this recent bond issuance, the proceeds will be allocated to fund the health care industry through the firm’s Global Commercial Bank. This includes eligible social investments of not-for-profit hospitals, health care equipment and supplies manufacturers, and skilled nursing facilities.
Bank of America’s Vice Chairman, Anne Finucane, has said in a statement that the firm is committed to doing its part through providing support for businesses and professionals that are on the front lines of this fight against the pandemic.
She said that the proceeds would help companies involved in the prevention, testing, diagnosis, and treatment of the viral disease acquire critical resources. Finucane also said that this would provide an opportunity for investors to join in the effort.
Bond Issuances Are Expected to Double
Borrowers around the globe have raised a record amount of debt worth $102.6 billion in 2020 to fight the impact of the coronavirus. According to data from Bloomberg, Chinese companies have recorded the most “pandemic bond” issues. Last month, Paraguay and South Korea’s Kookmin Bank sold debt in U.S. dollars to be used for COVID-19 relief.
American corporations are also catching up. Pharmaceutical giant Pfizer Inc. has issued a sustainability bond worth $1.25 billion to fund endeavors related to social and environmental impact. Meanwhile, USAA Capital Corp.’s sustainability bond, which will be used to fund projects that may include COVID-19 relief, was sold for $800 million.
It’s expected that the social and sustainability bond issuance will double to a new record this year. According to HSBC, issuers are taking advantage of the receptive capital markets to respond to the global crisis. HSBC also revealed that there was a 69% jump in supply for the first quarter compared to the same period in 2019. Banks are expected to become more active in issuing social bonds with the incentives to lend to small and medium-sized companies and the capital relief that they are getting from regulators in Europe.
