Bank of America issues first US bank social bond
$500 million bond for affordable housing and CDFI loans.
Bank of America has become the first US bank to issue a social bond. At the end of January, the bank issued a $500 million four-year (non-call three) bond that priced at 78 basis points over US Treasuries. The proceeds will be used to finance the bank’s current portfolio of affordable housing and lending to Community Development Finance Institutions (CDFIs).
Suzanne Buchta, managing director and global head of ESG Capital Markets at Bank of America Merrill Lynch, notes that the bank’s experience in issuing green bonds made the process relatively smooth. Bank of America has issued four green bonds, including a $2.25 billion issue in May last year. Buchta says she hopes other banks will follow suit. The demand is certainly there – Buchta says the deal was six times oversubscribed, pricing well in from the initial price talk of plus 95bp to 100bp.
Andrei Magasiner, treasurer of Bank of America, says that the bank’s social bond and green bond programmes have offered access to investors that would not typically be its funding sources. There was significant European participation in the bond, for example, which would not usually be the case for a US dollar-denominated issue.