Brussels, 24 May 2011
€4.75 billion bond issued for EU´s assistance packages to Ireland and Portugal
The European Commission, on behalf of the European Union, today issued a €4.75 billion bond with a 10 year maturity to fund disbursements of the assistance packages to Ireland and Portugal. From the proceeds Ireland will receive €3 billion and Portugal €1.75 billion, as loan under the European Financial Stabilisation Mechanism (EFSM), the disbursements will be made on 31 May 2011 (five business days settlement).
"The third successful placement in 2011 confirms the acceptance of the European Union as a benchmark issuer and the continuous confidence of the market in the stability and assistance measures set-up by the EU together with the EFSF and the IMF," said the Commission.
The new €4.75 billion benchmark matures on 4 June 2021, pays a coupon of 3.5% and was priced at mid-swaps +14 basis points, at the tight end initial price soundings.
"This compares very favourably with bonds of similar issuers. Investor interest was again very strong. Books were closed within one and a half hour, being oversubscribed three times," the Commission added.
Substantial investor demand came from across Europe - in particular from France (22%), Germany (15%) and the UK (15%) - as well as from Asia (25%). In terms of investor type, demand was well balanced between asset managers (27%), Central Banks (23%), insurance/pension investors (23%) and banks (20%).
Joint bookrunners were BNP Paribas, Crédit Agricole, Crédit Suisse, DZ Bank and JP Morgan. Co-leads were BofA Merrill Lynch, Barclays Capital, Deutsche Bank, HSBC, Morgan Stanley, SGCIB, UBS Investment Bank, and Unicredit (HVB).
Assistance package for Ireland
Ireland receives, as part of the joint financial support package agreed in December 2010 loans under the European Financial Stabilisation Mechanism (EFSM) and also from the European Financial Stability Facility (EFSF), the International Monetary Fund (IMF) as well as bilateral loans. The agreed assistance amount to €67.5 billion over 3 years, EFSM, EFSF (including bilateral loans) and IMF are contributing each with €22.5 billion.
Assistance package for Portugal
Following the formal request for financial assistance made on 7 April 2011 by the Portuguese authorities, the terms and conditions of the financial assistance package were agreed by the Eurogroup and the EU's Council of Economics and Finance Ministers on 17 May. The financial package will cover Portugal’s financing needs of up to €78 billion. The European Union (EU), through the use of the European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF) will both provide up to €26 billion each to be disbursed over 3 years. Further support will be made available through the International Monetary Fund (IMF) for up to €26 billion, as approved by the IMF Executive Board on 20 May.
The EU as a borrower
European Union is rated Aaa/AAA/AAA by Moody's, Standard &Poor's and Fitch.
The European Commission is empowered to contract borrowings on the behalf of the EU for the purpose of funding loans made under the European Financial Stabilisation Mechanism (EFSM). The EFSM is a Treaty-based mechanism, covering all EU Member States. Under the EFSM, the EU can borrow up to €60 billion to on-lend to any EU Member State. EFSM is currently activated for the assistance of Ireland and Portugal.
In addition, under the Balance of Payments (BoP) facility, support is available only to Member States which have not yet adopted the euro. Also under the BoP Regulation, the European Commission is empowered to raise funds on behalf of the EU and on-lend to the beneficiary countries. Currently, Romania, Latvia and Hungary have benefitted from the BoP facility.
With the new benchmark issuance and including € 9.6 from the previous issuances in January and March, the EU raised a total of € 14.4 billion in 2011, providing aid under the ESFM as well as under the Balance of Payments (BoP) loan programmes.
Further information on the EU as a borrower is available on the website:
European Union € 4.75 billion bond issue, 24 May 2011
Distribution of investors by Region/Country
Germany / Austria
Central Banks / OI
Insurance / Pension