I recently learnt a new concept: “Pandemic Bonds” and I thought of sharing few nuggets I’ve picked so far with the readings...

A THREAD.

1/ A few links first, for those who want comprehensive details about “pandemic bonds”.

https://www.worldbank.org/en/news/press-release/2017/06/28/world-bank-launches-first-ever-pandemic-bonds-to-support-500-million-pandemic-emergency-financing-facility

https://www.cnbc.com/2020/03/18/coronavirus-world-bank-pandemic-bond-investors-face-big-losses.html

Pour ceux qui préfèrent le français…

https://www.euromoney.com/article/b1klyqsykl0d0m/when-will-coronavirus-covid19-trigger-the-world-bank39s-pandemic-bond

2/ For starters, a bond is some sort of loan… When you buy a bond, you’re lending $ to the organization that issues it. The company, in return, promises to pay interest payments to you for the loan length. How much & how often you get paid interest depends on the bond terms.

3/ The interest rate, also called the coupon, is typically higher with long-term bonds. When the bond reaches the date of maturity, the issuer repays the principal, or original amount of the loan.

4/ For the lender, a bond is a kind of investment, like a stock. The #nce is that stocks are not loans. Stocks represent a partial company ownership & the returns represent a share in profits. Thus, stocks are riskier & more volatile – they reflect the success of a company...

5/ Bonds on the other hand, often have a fixed interest rate. Some bonds, however, are "floating-rate bonds" , meaning their interest rates adjust accordingly, depending on the market conditions. Ok, let's not digress much. Retour à nos moutons.

6/ Now, pandemic bonds are specialized bonds, aimed at providing financial support to the Pandemic Emergency Financing Facility (PEF), a facility created by the World Bank to channel surge funding to developing countries facing the risk of a pandemic.

7/ In 2017, they were essentially sold under the premise that those who invested in the bonds would lose their money if any of six deadly pandemics hit, including coronavirus... , someone somewhere knew/thought there’d be a probability of coronavirus outbreak in few years

8/ These bonds were in response to crises like the Ebola outbreak that had devastated West Africa around 2013-14, killing thousands of people. These lives could have been saved if these countries had access to financing at the start, hence well equipped to control the crisis.

9/ It actually took months to get together the money needed to combat the outbreak. Donors ended up committing more than $7bn. But the money came too late…

10/ Anyways, the first pandemic bond ever, was issued in 2017 and is set to mature in July 2020: Over $425 million worth of such bonds, which bet against a global outbreak of infectious diseases and will default if WHO declares the coronavirus a pandemic.

11/ The bonds were administered in 2 tranches: Class A bond investors receiving a return of 6.9% annually. This bond raised $225million and the payout would be halted if there was an outbreak of new influenza viruses or coronaviridae (SARS, MERS).

12/ Class B bond investors:11.5% annual return. The World Bank raised $95million for this bond. This bond would keep investors’ money if there is was an outbreak of Filoviridae (Ebola, Marburg), Coronavirus, Lassa Fever, Rift Valley Fever, and/or Crimean Congo Hemorrhagic Fever

13/ Total bonds raised: $425million if you count the derivatives (about $105million).

The bond sale was reported to have been 200 % oversubscribed, “with investors eager to get their hands on the high-yield returns on offer”.

14/ In the event of no pandemic and the bonds reached maturity (July ‘20), investors would get their money back.

In the meantime, they would earn interest and get paid a healthy annualized return.

As an investor, of course, you wouldn’t want to lose money, right?...

15/ Now, in the event of a pandemic before the bonds get triggered, investors might lose some of their original investment, but developing countries (76 or 77 on the list) would get much needed funds to fight the disease outbreak.

Win-win, huh?!...

16/ Plus, it would be in the interest of everyone to keep safe and have the virus under control..

Sounds good so far?...

17/ With catastrophe bonds before, investors would bet on the wind speed of hurricanes for instance but now, they were betting on the likelihood of an infectious disease that could tear through nations across the globe.

18/ Now, there are several & crazy predetermined conditions under which the payout on bonds will default, like: how rapid the infectious disease spreads, the number of countries affected (at least 2countries with >20deaths each – now it’s way more than that),

19/ the number of deaths (> 2,500 for class B bond – now there are 126k+), the time period (12weeks across many countries from when the triggering outbreak began - this passed on March 23), etc. & most importantly whether WHO declares it as a global pandemic or not..

20/ With Ebola outbreak last year in DRC, people hoped the pandemic bonds would be used for financial assistance but hey, nope… The World Bank didn’t pay out because it didn’t meet the threshold: it didn’t spread enough, not enough dead people in a 2nd country, etc.

21/ Investors held on their principal and kept earning interest.

On the other hand, #Covid19 crisis was initially downplayed - why? Well, I guess to avoid payout on Pandemic Insurance Bonds.

22/ So mainly, the bond payout is higher if they wait long enough to have mass deaths before calling it a pandemic. If it’s labeled a pandemic too soon, investors get less money.

23/ Bon, à priori, je me suis dit... This is good stuff! Poor countries will receive financial assistance and all… but let’s look at it closely: Why the delay now? Why the disconnect?

The Covid19 crisis has met or rather surpassed many of the bank’s criteria now...

24/ But the developing countries are yet to receive a single dime…. SMH. Meanwhile investors have been pocketting their interests (about 96$ million so far) as they decide how to honor their end of the deal. On s' croirait dans un film sci-fi, hein?..

25/ The pandemic bond is a 386 pages’ contract written in a suoer tricky way...

“By the time bond investors will pay money towards..the developing countries...It’s a case of too little, too late because the way these contracts are designed, they are too complex”

26/ Tell me all these catastrophes are not a coincidence, or rather planned out in advance? A planned-emic, if you want.

A well calculated move for the superpowers to realign themselves, making a few bucks whilst depopulating!..

27/ Really, someone bet on this coronavirus and is cashing in. You know, like weather derivate betting. First, make shitty weather and then money on bets that the farmers loose their crop! Ha!

No intention to help pandemic-striken countries but enrich Wall Street investors..

28/ In the words of Martin Armstrong, the World Bank’s pandemic bonds are “a giant gamble in the global financial casino” and a “scheme like no other”…

Une honte internationale, franchement!

29/ Most people in these developing countries lack basic necessities for preventing diseases, i.e access to safe water, soap for handwashing, sufficient medical supplies, some if not many live in communities that make social distancing impossible, etc.

30/ These pandemic bonds are just demonstrating the uncanny ability of global capital to profit from social ills and just another hollow investment.

Issa global event that has been in the making for a long time, if you ask me..

End/ La question que je me pose au final: À qui profite le crime réellement?...

You got more info to share? comments on the above? Points of correction? Please do share.

Let’s continue learning together.