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EU €3 billion 15-year bond for Ireland and Portugal meets with close to €6 billion investor demand

October 24, 2012
The European Union (EU) today issued a €3 billion benchmark bond with 15 years maturity. From the proceeds €1 billion will be on-lent to Ireland and €2 billion to Portugal, as part of their financial assistance packages and following to the successful completion of the recent reviews: seventh review mission to Ireland and fifth review mission to Portugal. The transaction was carried out by the European Commission on behalf of the EU under the European Financial Stabilisation Mechanism (EFSM).

The new 15y transaction concludes the EU's EFSM funding activities in 2012, which raised €15.8 billion in six long-term benchmarks in support of Ireland and Portugal.

The maturity is determined by the targeted maximum average maturity of 12.5 years for EFSM loans to Ireland and Portugal, reaching now an average maturity of 12.38 and 12.41 years respectively.

The EU had initially targeted a €2 to €3 billion bond but the strong order book of almost €6 billion clearly allowed for a €3 billion issue and a high quality investor diversification at the same time.

Books were opened at 9am CET and closed at 11.30am, containing almost 150 orders. Price was fixed at mid-swaps +36 basis points, tighter than the initial guidance of +38 area.

The €3 billion bond matures on 4 November 2027, pays a coupon of 2.5% and yields 2.621%. Funding cost will be passed to the beneficiary countries without any margin. The disbursements are foreseen for 30 October 2012, the settlement date of the bond.

Geographically, Germany/Austria had the highest allocation with 31% of the deals, followed by the UK (25%), Benelux (12%), Switzerland (10%), France (9%) and the Nordic Countries (7%) Other Europe had 1% and 5% was allocated outside Europe.

In terms of investor type, asset managers were in the lead with 52% of the allocation, followed by insurances/pension funds (21%), banks (13%), Central Banks/Official Institutions (9%) and others (5%).

Joint lead managers were BNP Paribas, Deutsche Bank, HSBC, Natixis and UBS Investment Bank.

Co-leads were Credit Suisse, DZ Bank, Goldman Sachs, JP Morgan, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland and Unicredit.

Background
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 contributes with €22.5 bn. The agreed assistance for Portugal totals to up to €78 bn with an EFSM share of €26 bn.

Until to date and including today´s issuance, the EU via the EFSM has disbursed €21.7 bn to Ireland and €22.1 bn to Portugal. Complementary disbursements have been made by the EFSF and the IMF.

Since January 2011 the EU has raised in total €45 bn from the bond market, used mainly for the EFSM (€43.8 bn) and the remainder for a Balance of Payments loan programme.

No further EFSM funding is planned for 2012. Subject to Ireland´s and Portugal´s requirements and to quarterly reviews, the EU's remaining funding requirements for 2013 are €4.7 bn, completing the EFSM programmes for Ireland and Portugal. Additional smaller amounts might be placed under the BoP and the MFA.

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.
  • Status
    outstanding
  • Country of risk
    Belgium
  • Redemption (put/call option)
    *** (***)
  • Amount
    3,000,000,000 EUR
  • М/S&P/F
    — / — / —
Company — European Union
  • Full name
    European Union
  • Registration country
    Belgium