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MEMO/12/253

Brussels, 17 April 2012

EU places € 1.8 billion 26-year bond for Portugal

The European Union (EU) today launched its third long-term bond in 2012, placing € 1.8 billion with a maturity of 26 years. The operation met with widespread investor demand. The proceeds will be on-lent to Portugal following a successful conclusion of the third programme review, as part the financial assistance package decided in May 2011. The transaction was carried out by the European Commission on behalf of the EU under the European Financial Stabilisation Mechanism (EFSM).

The new deal is yet another successful EU long-term issuance, following bonds with 20y and 30y maturities in January and February 2012. It extends further the average maturity of the EU loans to Portugal. The Commission considers the successful issuances a sign of confidence in the European stability measures.

The size of the transaction was limited by the overall average maturity of the EU loan to Portugal which is capped to 12, 5 years. Additional funding of € 2.7 billion will be done until the end of May for Portugal in shorter maturities.

The € 1.8 billion bond matures on 4 April 2038, pays a coupon of 3.375% and was priced at mid-swaps +87 basis points, for a total yield of 3.428%. The funding cost will be passed on to Portugal without any margin. The order book was closed within less than 1.5 hours, containing orders of more than granularity with almost 120 accounts. It was closed within less than two hours, containing orders of more than € 2.6 billion from almost 70 accounts.

Geographically, Germany led the demand with 74% of the allocations, followed by UK (14%), Scandinavia (5%), Benelux (2%) and Switzerland (2%). The remainder of allocations was made to other Europe.

In terms of investor type, insurances had 49% of the allocation, asset managers 21%, and pension funds 20%, banks 5%, Central Banks/Official Institutions 4% and others 1%.

Joint lead managers were Barclays, Deutsche Bank, DZ Bank and HSBC. Co-leads were Commerzbank, Credit Suisse, Goldman Sachs, ING, JP Morgan, Morgan Stanley, Société Générale and UBS.

The disbursement to Portugal is foreseen for 24 April 2012, the settlement date of the bond.

Background

Portugal, as well as Ireland, 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 Portugal amounts to up to € 78 bn over 3 years, where the EU (EFSM) contributes € 26 bn. Until to date and including today's issuance, the EU via the EFSM has disbursed € 17.4 bn to Portugal.

Since January 2011, including the recent transaction, the EU has raised in total € 37 bn from the bond market, used mainly for the EFSM (€ 35.8 bn) and the remainder for a Balance of Payments loan programme. The EU's current funding requirements for the second half of 2012 - over and above the amounts to be raised for Portugal this quarter - amount to € 2 bn.

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/


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