Brussels, 9 January 2012
EU successfully issued long-term bond with 30y maturity, funding loans of € 3 billion for Ireland and Portugal
On the back of strong and wide spread investor demand the European Union (EU) placed today a € 3 billion bond with 30 years maturity; a statement of market confidence to the EU. The operation was carried out by the European Commission on behalf of the EU under the European Financial Stabilisation Mechanism (EFSM). From the proceeds Ireland and Portugal will receive back-to-back € 1.5 billion each as part of their financial assistance packages.
The new benchmark bond is the first EU issuance with a maturity as long as 30 years, a maturity that is a rarity both in euros and for supranational issuers. This long dated funding will further extend the average maturity of the EU loans to Ireland and Portugal and thereby improve debt sustainability and the long term outlook of both countries (see also MEMO/11/602).
The € 3 billion bond matures on 4 April 2042, pays a coupon of 3.75% and was priced at mid-swaps +125 basis points. Order books including almost 120 quality accounts were closed within two hours, having subscriptions of about € 5.2 billion.
As expected with such long dated issue, the predominant part of the investor demand came from within the EU, with Germany at 70%, followed by the UK at 13% and the Benelux (8%). Switzerland contributed with 4%.
In terms of investor type, insurance/pension funds/asset managers were far leading with 92%, banks counted with 6%.
Joint lead managers were Barclays Capital, BNP Paribas, Deutsche Bank and Goldman Sachs. Co-leads were Commerzbank, Crédit Agricole CIB, DZ Bank, ING, JP Morgan, Morgan Stanley, RBS and UBS.
Disbursements to Ireland and Portugal will be made on 16 January 2012, the settlement date of the bond and in line with the funding requirements of these countries.
The today´s bond is the first EU bond issued in 2012. In 2011 a total of € 29.2 billion from 7 transactions 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 and Portugal receive 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 will contribute with € 22.5 bn. The agreed assistance for Portugal totals to up to € 78 bn with an EFSM share of € 26 bn.
In 2012, under EFSM, the EU intends at this moment to issue bonds for a total amount of about € 12.5 billion, to be used for loans to Ireland and Portugal. Additional smaller amounts might be placed under the Macro-Financial Assistance (MFA) and BoP 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.
The EU´s € 4 bn 3% 15 years bond issued in September 2011 has recently been chosen for the IFR Award 2011 as best issuance in the category supranational/sovereign/agency/regional bonds.
EU investor relations website: http://ec.europa.eu/economy_finance/eu_borrower/