PRICING SUPPLEMENT
Inter-American Development Bank Global Debt
Program
Series No.: 790
Tranche No.: 12
USD100,000,000 Floating
Rate Notes due March 20, 2028 (the "Notes") as from March 7, 2025,
to be consolidated and form a single series with the Bank's
USD500,000,000 Floating Rate Notes due March 20, 2028, issued on
March 19, 2021 (the "Series 790 Tranche 1 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
May 14, 2021 (the "Series 790 Tranche 2 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
May 21, 2021 (the "Series 790 Tranche 3 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
June 9, 2021 (the "Series 790 Tranche 4 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
June 16, 2021 (the "Series 790 Tranche 5 Notes"), the Bank's
USD300,000,000 Floating Rate Notes due March 20, 2028, issued on
June 23, 2021 (the "Series 790 Tranche 6 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
April 28, 2022 (the "Series 790 Tranche 7 Notes"), the Bank's
USD200,000,000 Floating Rate Notes due March 20, 2028, issued on
June 23, 2022 (the "Series 790 Tranche 8 Notes"), the Bank's
USD100,000,000 Floating Rate Notes due March 20, 2028, issued on
May 2, 2024 (the "Series 790 Tranche 9 Notes"), the Bank's USD
100,000,000 Floating Rate Notes due March 20, 2028, issued on May
10, 2024 (the "Series 790 Tranche 10 Notes"), and the Bank's USD
100,000,000 Floating Rate Notes due March 20, 2028, issued on
January 21, 2025 (the "Series 790 Tranche 11 Notes").
Issue Price: 100.043
percent plus 77 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
Citigroup
The date of this Pricing
Supplement is March 5, 2025.
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
/ 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.
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1.
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Series No.:
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790
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Tranche No.:
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12
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2.
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Aggregate Principal Amount:
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USD100,000,000
As from the Issue Date, the Notes
will be consolidated and form a single series with the Series 790
Tranche 1 Notes, the Series 790 Tranche 2 Notes, the Series 790
Tranche 3 Notes, the Series 790 Tranche 4 Notes, the Series 790
Tranche 5 Notes, the Series 790 Tranche 6 Notes, the Series 790
Tranche 7 Notes, the Series 790 Tranche 8 Notes, the Series 790
Tranche 9 Notes, the Series 790 Tranche 10 Notes, and the Series
790 Tranche 11 Notes
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3.
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Issue Price:
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USD101,038,000, which amount
represents the sum of (a) 100.043 percent of the Aggregate
Principal Amount plus (b)
the amount of USD995,000, representing 77 days' accrued
interest, inclusive.
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4.
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Issue Date:
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March 7, 2025
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5.
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Form of Notes (Condition 1(a)):
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Book-entry only
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6.
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Authorized Denomination(s)
(Condition 1(b)):
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USD1,000 and integral multiples
thereof
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7.
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Specified Currency (Condition
1(d)):
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United States Dollars (USD) being
the lawful currency of the United States of America
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8.
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Specified Principal Payment
Currency
(Conditions 1(d) and 7(h)):
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USD
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9.
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Specified Interest Payment
Currency
(Conditions 1(d) and 7(h)):
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USD
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10.
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Maturity Date
(Condition 6(a); Fixed Interest
Rate):
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March 20, 2028
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11.
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Interest Basis (Condition 5):
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Floating Rate (Condition
5(II))
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12.
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Interest Commencement Date
(Condition 5(III)):
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December 20, 2024
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13.
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Floating Rate (Condition
5(II)):
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(a)
Calculation Amount (if different than Principal Amount of the
Note):
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Not Applicable
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(b)
Business Day Convention:
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Following Business Day Convention
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(c)
Specified Interest Period:
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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.
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(d)
Interest Payment Date:
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Quarterly in arrear on March 20,
June 20, September 20 and December 20 in each year, commencing on
March 20, 2025, up to and including the Maturity Date.
Each Interest Payment Date is
subject to adjustment in accordance with the Business Day
Convention.
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(e)
Interest Period Date:
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Each Interest Payment Date
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(f)
Reference Rate:
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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
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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 (+) 0.27 percent per annum
(b)
Floating Rate Day Count Fraction if not
actual/360:
Actual/360
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(c)
Relevant Banking Center:
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New York
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15.
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Relevant Financial Center:
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New York
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16.
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Relevant Business Day:
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A day which is a U.S. Government
Securities Business Day and a New York Business Day.
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17.
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Issuer's Optional Redemption
(Condition 6(e)):
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No
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18.
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Redemption at the Option of the
Noteholders (Condition 6(f)):
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No
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19.
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Early Redemption Amount (including
accrued interest, if applicable) (Condition 9):
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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)).
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20.
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Governing Law:
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New York
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Other Relevant Terms
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1.
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Listing (if yes, specify Stock
Exchange):
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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
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2.
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Details of Clearance System Approved
by the Bank and the Global Agent and Clearance and Settlement
Procedures:
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Federal Reserve Bank of New York;
Euroclear Bank SA/NV; Clearstream Banking S.A.
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3.
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Syndicated:
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No
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4.
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Commissions and Concessions:
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0.007% of the Aggregate Principal
Amount
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5.
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Estimated Total Expenses:
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The Issuer has agreed to pay for all
material expenses related to the issuance of the Notes, including
legal expenses of the Dealer.
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6.
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Codes:
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(a) Common Code:
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231872639
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(b) ISIN:
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US4581X0DU94
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(c) CUSIP:
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4581X0DU9
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7.
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Identity of Dealer:
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Citigroup Global Markets
Limited
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8.
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Additional Risk Factors:
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As set forth in the Supplemental
Prospectus Information
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9.
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Selling Restrictions:
(a) United States:
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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.
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(b) United Kingdom:
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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.
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(c) Singapore:
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The Dealer represents, warrants and
agrees, that it has not offered or sold any Notes or caused the
Notes to be made the subject of an invitation for subscription or
purchase and will not offer or sell any Notes or cause the Notes to
be made the subject of an invitation for subscription or purchase,
and has not circulated or distributed, nor will it circulate or
distribute the Prospectus, this Pricing Supplement or any other
document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the Notes, whether
directly or indirectly, to any person in Singapore other than: (i)
to an institutional investor (as defined in Section 4A of the SFA)
pursuant to Section 274 of the SFA or (ii) to an accredited
investor (as defined in Section 4A of the SFA) pursuant to and in
accordance with the conditions specified in Section 275 of the SFA
and (where applicable) Regulation 3 of the Securities and Futures
(Classes of Investors) Regulations 2018 of Singapore.
Investors should note that there may
be restrictions on the secondary sale of the Notes under Section
276 of the SFA.
Any reference to the SFA is a
reference to the Securities and Futures Act 2001 of Singapore and a
reference to any term that is defined in the SFA or any provision
in the SFA is a reference to that term or provision as amended or
modified from time to time including by such of its subsidiary
legislation as may be applicable at the relevant time.
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 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).
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(d) General:
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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.
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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 / 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 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.
2. 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
