The World Bank has raised an additional A$50 million (US$33.80 million) for its Kangaroo bond due August 2020 – the first bond created, allocated, transferred and managed through its life cycle using distributed ledger (blockchain) technology.
The bond re-opening, announced on August 16, expands the market participation with the Bond-i platform combining three joint lead managers – Commonwealth Bank of Australia (CBA), RBC Capital Markets and TD Securities – and brings together new market participants. These include an offshore investor and the existing investor community, as well as ongoing support and input from TCorp (NSW Treasury Corporation).
The World Bank priced the original offering in August 2018 amounting to A$110 million for two years. Then in May this year, the World Bank and CBA, with TD acting as market maker, brought additional capability to the platform by enabling secondary bond trading recorded on blockchain, making this the first bond whose issuance and trading are recorded using distributed ledger technologies.
Bond-i (or blockchain operated new debt instrument) is part of a broader strategic focus of the World Bank to harness the potential of disruptive technologies for development to benefit the World Bank’s clients. The blockchain innovation lab of the World Bank was set up in June 2017 as an innovation hub for poverty reduction projects across the world and includes developing opportunities to use blockchain and other disruptive technologies in areas such as land administration, supply chain management, health, education, cross-border payments and carbon market trading.
James Wall, executive general manager, international, at CBA, describes the bond re-opening as an important milestone in demonstrating the full life cycle management of an issuer’s capital markets needs. “It is also a significant step for the platform bringing on additional participants and demonstrating the broader potential of Bond-i as a capital markets platform,” he says.
Andrea Dore, the head of funding at the World Bank, says, “We are happy to see the continued, strong support and collaboration from investors and partners. The World Bank’s innovation and experience in the capital markets is key to working with our member countries to increase digitization to boost productivity in their economies and accelerate progress towards the Sustainable Development Goals.”
TD director Yuriy Popovych says an increase to the line is a natural evolution for the trade providing a great opportunity for both new and existing investors to get involved.
Sophie Gilder, head of blockchain and AI at CBA, says the initial blockchain bond and the subsequent bond management, secondary trading and the bond re-opening through the same platform provided a tangible evidence that blockchain technology can deliver a new level of efficiency, transparency and risk management capability versus the existing market infrastructure. “Next, we intend to deliver additional functionality to bring greater efficiency in settlement, custody and regulatory compliance,” she adds.
Jigme Shingsar, managing director for debt capital markets at RBC, notes that although the technology is still in its early stages, blockchain networks have the potential to transform financial services, offering a leap forward in the market transparency and efficiency.