Visitors to the triple-A rated Asian Development Bank might once have been invited for a leisurely game of doubles before discussing how far through Libor its bonds should trade. How times have changed. The ADB's tennis courts were converted into car parking space in March, an omen of busier and more troubled times ahead.
International investors clearly take seriously the possibility that one or both of the major rating agencies might downgrade the ADB - and soon. The bank's benchmark dollar issue, which at launch in June 1997 traded 2 basis points wider than World Bank and 2bp through the Inter-American Development Bank, has been tremendously volatile. At one point in March the ADB 2007 traded 13bp wider than World Bank and 5bp wider than the Latin bank. Its 10-year Deutschmark deal has traded 20bp wider than the EIB.
More significantly, the ADB's most recent deal had to be scaled down dramatically. Originally slated as a $3 billion to $4 billion benchmark, the deal was slashed to $2 billion as a combination of Molotov cocktails, looting and tanks in Jakarta persuaded some investors that a bank which has nearly a quarter of its loans in Indonesia might not be such a stable credit story after all.