Pope, Bono buy bonds for poor kids' vaccines

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Securities with triple-A credit rating are part of a 10-year plan to immunize children around the world.

LONDON (Reuters) -- Pope Benedict joined other religious leaders, rock stars and financial institutions Tuesday to buy into a $1 billion bond issue that will fund life-saving vaccines for children in poor countries.

Investors bid for almost twice the amount of securities on offer as British finance minister Gordon Brown launched the project to fight preventable diseases like polio and measles.

The offering, the first of its kind, was the start of a 10-year initiative known as the International Finance Facility for Immunization.

"We will ultimately raise an extra $4 billion to deliver life-saving vaccines to children in the poorest countries," Brown said at the launch, flanked by religious leaders and Queen Rania of Jordan.

"This will immunize 500 million children by 2015, saving 10 million lives, and help to eradicate polio from the world."

Brown handed the first bond to Cardinal Renato Martino, head of the Vatican's Justice and Peace Council, who bought it in the Pope's name.

"It is the hope of Pope Benedict that the participation by the Church in this program will help to inspire others to take the step toward concrete action," he said.

Five more bonds were sold to the Archbishop of Canterbury, Chief Rabbi Jonathan Sachs, the Muslim Council of Britain, the Hindu Forum of Britain and the Network of Sikh Organizations.

Rockers-turned-activists Bono and Bob Geldof will also buy some of the bonds and the project has the support of the Bill and Melinda Gates Foundation.

Millennium development goals

Brown argues new funding mechanisms are needed if U.N. goals on child poverty are to be met, and wants the creation of a wider scheme that could double rich countries' aid spending to $100 billion a year.

But the idea of using aid pledges as collateral to raise funds has run into repeated opposition from the United States, which is reluctant to make commitments under one administration that must be passed on to the next.

Some lobbying groups have also voiced concern that a plan relying on future aid pledges may pose problems later.

Advocates, however, argue more lives can be saved by front-loading aid, particularly with vaccination, and Gordon Brown said he was confident more countries would come on board.

"I think gradually we'll see other countries decide it's in their interest to join," he told reporters. "This method of financing has a long-term future."

Britain is the biggest contributor to the scheme, backed by five other European countries - France, Italy, Spain, Sweden and Norway. Brazil and South Africa have also committed to join at a later date.

Investment banks Goldman Sachs (down $0.65 to $189.35, Charts) and Deutsche Bank (up $1.57 to $127.00, Charts) , which coordinated the issue, said they priced it at "the tightest spread imaginable" for a new issue of this kind.

The bond, which carries a top-notch triple A credit rating, was priced to yield a premium of 31 basis points over the equivalent U.S. Treasury note, reflecting the healthy demand. There are 100 basis points in one percent.

Of the bonds sold, 25 percent was sold to central banks and official institutions, 25 percent to fund managers, 23 percent to pension funds and 8 percent to retail investors. Banks, corporations and insurance companies bought the remainder.

Copyright © 2006 Reuters. All rights reserved.

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This page contains a single entry by Brenda published on November 9, 2006 11:35 PM.

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