Sélecteur de langues
Brussels, 26 June 2012
EU placed € 2.3 billion long 15-year bond in support of Ireland
The European Union (EU) today placed a € 2.3 billion benchmark bond with April 2028 maturity, seeing strong investor demand. The proceeds will be on-lent to Ireland as part the financial assistance package decided in December 2010 and following a successful completion of the sixth programme review (see MEMO/12/283 and MEX/12/0626). 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 at the longer end of maturities provided to Ireland, after 30y and 20y bonds in the beginning of the year. Recent issuance brings the average maturity of EU loans to Ireland close to the targeted maximum average maturity of 12.5 years. 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 order book opened at 9h20 CET and was closed within two hours, containing orders of almost € 3.7 billion.
The new € 2.3 billion bond matures on 4 April 2028 and pays a coupon of 2.875%. Price was fixed at mid-swaps +68 basis points, giving a total yield of 2.877%.
Funding cost will be passed on to Ireland without any margin; the disbursement to Ireland is foreseen for 3 July 2012, the settlement date of the bond.
Geographically, Germany led the demand with 45% of the allocation, followed by the UK (22%), Scandinavia (9%), the Netherlands (6%), Switzerland (6%) and France (5%). Other Europe had 5%. A low Asian take-up of 2% is explained by the long maturity.
Distribution by investor type shows a good quality with 79% going to real money investors and official institutions: insurances had 26%, asset managers 25%, central banks/official institutions 18%, pension funds 10%, banks 16%, and others 5% of the allocations.
Joint lead managers were Barclays, Credit Suisse, DZ Bank, Morgan Stanley and Société Générale CIB.
Co-leads were Bank of America/Merrill Lynch, Crédit Agricole CIB, Goldman Sachs, J.P. Morgan, Natixis, RBC Capital Markets, UBS and Unicredit.
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 external assistance for Ireland, as agreed in December 2010, amounts to up to € 67.5 bn over 3 years, where the EU (EFSM) contributes € 22.5 bn. Until to date and including today´s issuance, the EU via the EFSM has disbursed € 20.7 bn to Ireland.
Today´s issuance concludes EU financing programme of the first half of 2012, raising in five transactions the total amount of € 12.8 billion for the support of Ireland and Portugal. The EU´s remaining funding requirement in 2012 for these two countries is € 3 billion, to be raised from September.
Since January 2011, including the recent transaction, the EU has funded in total € 42 bn from the bond market, used mainly for the EFSM (€ 40.8 bn) and the remainder for the Balance of Payments loan programme.
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/