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Brussels, 27 February 2012
EU issues € 3 billion 20 year bond for Ireland
The European Union (EU) today placed a € 3 billion bond with 20 years maturity seeing very strong investor demand. The proceeds will be on-lent to Ireland following a successful conclusion of the 5th programme review as part the financial assistance package decided in December 2010. The operation was carried out by the European Commission on behalf of the EU under the European Financial Stabilisation Mechanism (EFSM).
The new transaction is again a successful EU issuance with a long-term maturity, after a 30y bond in the beginning of January. Long dated funding is extending the average maturity of the EU loans and thereby improves debt sustainability and fiscal consolidation of the beneficiary country.
The € 3 billion bond matures on 4 April 2032, pays a coupon of 3.375% and was priced at mid-swaps +78 basis points, at the lowest end of initial price guidance for a total yield of 3.396%. The funding cost will be passed on to Ireland without any margin. The order book shows a good granularity with almost 120 accounts. It was closed within less than two hours, containing orders of more than € 5.5 billion.
The investor demand came mainly from within the EU, with 48% allocation to Germany/Austria followed by UK/Ireland with 30%, the Netherlands (7%) and Italy (5%). Switzerland had 4% and other Europe 3%. Also 3% was allocated to investors from Asia.
In terms of investor type, asset managers as well as pension/insurance funds had each 32% of the allocation, followed by banks with 19%, Central Banks/Official Institutions with 13% and others with 4%.
Joint lead managers were Citigroup, Deutsche Bank, DZ Bank, RBS and UBS Investment Bank. Co-leads were Banco Santander, Commerzbank, Crédit Agricole, Credit Suisse, JP Morgan, Morgan Stanley, Société Générale and Unicredit.
The disbursement to Ireland is foreseen for 5 March 2012, the settlement date of the bond.
Today´s bond issuance is the second EU bond in 2012 after a first transaction of € 3 bn with 30y maturity on 9 January, in support of Ireland and Portugal. In 2011 a total of € 29.2 billion have been raised in the market out of which € 28 bn were for the EFSM (€ 13.9 bn disbursed to Ireland, € 14.1 bn disbursed to Portugal) and € 1.2 bn for the Balance of Payments (BoP) loan programme (disbursed to Romania).
Ireland as well as Portugal receives loans from financial assistance packages, jointly provided by the EU (EFSM), the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF). The agreed external assistance for Ireland amounts to up to € 67.5 billion over 3 years, where the EFSM contributes € 22.5 bn.
In 2012, under EFSM, the EU intends to issue further bonds for a total amount of about € 7 billion, to be used for loans to Ireland and Portugal. Additional smaller amounts might be placed under the BoP and the Macro-Financial Assistance (MFA) programmes.
The EU, rated triple-A by the major rating agencies, funds its loans by issuing debt instruments in the capital markets. Issuances by the EU are executed by the European Commission's financial operations department located in Luxembourg.
EU investor relations website: http://ec.europa.eu/economy_finance/eu_borrower/