Bank of America Corp. will arrange a $500 million debt swap for marine conservation in Gabon, as these types of deals gain in size and popularity, according to people familiar with the planned transaction.
The deal, due to be announced in July, will involve The Nature Conservancy, a US-based conservation nonprofit, said the people, who declined to be identified. Until now, Credit Suisse Group AG has dominated this market, having run similar debt conversions for Belize, Barbados and Ecuador.
Bank of America and Gabon’s environment minister declined to comment. In a statement, TNC said it’s “pleased that Gabonese leaders see value in conservation, but we’re unable to discuss projects that the nation may be pursuing.”
Banks in Europe and the US are vying to play a role in structuring and arranging new debt-for-nature swaps, deals that yield fees and boost their profile in the sustainable debt market. Developing countries with valuable ecosystems are turning to debt-for-nature swaps as a way to lower their debt burden and, at the same time, meet commitments to protect 30% of their land and sea by 2030.
Credit Suisse arranged the first such deal, a $364 million transaction for Belize in November 2021. Last year, the Swiss bank sealed a $150 million swap for Barbados. And this week, it closed the largest ever debt-for-nature swap, a $656 million deal for Ecuador to help fund the conservation of the threatened waters around the Galapagos islands.
Debt-for-nature swaps have been around since the 1980s, but until recently were dominated by nonprofits and bilateral creditors. In their modern guise, a structure conceived of by Credit Suisse and TNC and made possible by credit enhancement from development banks like the US Development Finance Corp. and the Inter-American Development Bank, institutional investors can buy-in via bonds issued to finance the new sovereign debt.
Gabon has created 20 protected areas covering 26% of its marine waters, or 53,000 square kilometers (20,500 square miles). Those include the largest breeding populations of leatherback and olive ridley turtles, as well as 20 species of whales and dolphins.
The African country has $700 million of debt falling due in 2025 and $1.8 billion due in 2031, according to data compiled by Bloomberg.
--With assistance from Antony Sguazzin.
(Adds comment from TNC in third paragraph.)
