EU breidde aantal obligaties ESFS in september uit (en)
The European Union (EU) placed on 29 September a € 1.1 billion bond with 7 years maturity, completing a successful series of EU bond issuances done over the last weeks. The operation, under the European Financial Stabilisation Mechanism (EFSM), was carried out by the European Commission on behalf of the EU. From the proceeds Ireland will receive € 500 million and Portugal € 600 million of loans as part of their financial assistance packages.
The € 1.1 billion bond matures on 4 October 2018, pays a coupon of 2.375% and was priced at mid-swaps +15 basis points. The size of the bond was limited to € 1.1 billion, based on the overall funding requirements of Ireland and Portugal. The 7 year maturity was chosen to reflect the countries´ demand for extending the duration of the loans.
Order books including more than 60 quality accounts were closed within two and a half hours, having subscriptions of about € 1.6 billion.
61% of the investor demand came from Europe, where the UK, Germany and the Nordic Countries were equally balanced with about 13% each. Outside Europe, Asia was a dominant contributor with 27%, followed by the Middle East (9%) and the Americas (3%).
In terms of investor type, the strongest demand came from Central Banks (35%) followed by investment managers (25%), banks (24%) and insurance/pension funds (15%).
Joint lead managers were Credit Suisse, Morgan Stanley and Société Générale CIB. Co-leads were BBVA, Citi, Commerzbank, DZ Bank and ING.
Disbursements to Ireland and Portugal will be made on 6 October, the settlement date of the bond.
The € 1.1 bn bond is the third EU bond issued in September. Earlier in the month, the EU raised the amount of € 9 billion in two operations: € 5 bn with 10yr maturity on 14 September and € 4 bn with 15yr maturity on 22 September. Funding raised by the EU so far in 2011 sums up to a total of € 29.2 bn from 7 transactions out of which € 28 bn are for the EFSM and € 1.2 bn for the Balance of Payments (BoP) loan programmes.
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. The agreed assistance for Ireland amounts to up to € 67.5 billion over 3 years, where the EFSM will contribute with € 22.5 billion. The agreed assistance for Portugal totals to up to € 78 billion with an EFSM share of € 26 billion.
For the remainder of 2011, the EU intends to issue one further benchmark bond. This upcoming funding will be used for loans to Ireland and/or Portugal. Further bonds are expected to be issued by the EFSF.
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/