PRICING SUPPLEMENT
Inter-American Development Bank
Global Debt Program
Series No.: 886
Tranche No.: 8
USD100,000,000 Floating Rate Notes due October 5,
2028 (the "Notes") as from October 23, 2024, 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") and the
Bank's USD100,000,000 Floating Rate Notes due October 5, 2028,
issued on September 20, 2024 (the "Series 886 Tranche 7
Notes").
Issue Price: 100.184 percent plus 16 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
Nomura
The date
of this Pricing Supplement is October 21, 2024.
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.:
|
886
|
|
|
Tranche No.:
|
8
|
|
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 and the Series 886
Tranche 7 Notes.
|
|
3.
|
Issue Price:
|
USD100,416,000 which amount
represents the sum of (a) 100.184 percent of the Aggregate
Principal Amount plus (b)
the amount of USD232,000 representing 16 days' accrued interest,
inclusive.
|
|
4.
|
Issue Date:
|
October 23, 2024
|
|
5.
|
Form of Notes
(Condition 1(a)):
|
Book-entry only
|
|
6.
|
Authorized Denomination(s)
(Condition 1(b)):
|
USD1,000 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 7(h)):
|
USD
|
|
9.
|
Specified Interest Payment
Currency
(Conditions 1(d) and 7(h)):
|
USD
|
|
10.
|
Maturity Date
(Condition 6(a)):
|
October 5, 2028
|
|
11.
|
Interest Basis
(Condition 5):
|
Floating Interest Rate (Condition 5(II))
|
|
12.
|
Interest Commencement Date
(Condition 5(III)) :
|
October
5, 2024
|
|
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 January 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
IndexStart" 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
IndexEnd" 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).
"dc" 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 IndexStart or SOFR
IndexEnd 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 ("SOFRi")
does not so appear for any day, "i" in the Observation Period,
SOFRi 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:
|
Nomura International plc
|
|
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:
|
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, 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 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 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
