Strong and granular demand for EIB’s new EUR 5bn 5-year EARN

Posted on 19, January 2013 by | This entry was posted in Banks, European Union, Financial, Investment, Luxembourg. Bookmark the permalink.
  • Transaction driven by strong demand from Central Banks and a granular European orderbook
  • High quality, very granular – over 170 orders – and swift execution
  • First EARN benchmark through mid-swaps since 2008

19-1-2013 — /europawire.eu/ — The European Investment Bank today priced its first EUR benchmark Euro Area Reference Note (EARN) of 2013. The issue carries an annual coupon of 1.0% and has a final maturity date of 13th July 2018, providing a fresh liquidity point with a current coupon in the belly of the EIB EARNs curve.  The transaction is EIB’s first 5-year EARN benchmark since May 2011. The bond was priced at a spread of mid-swaps less 1 bp, in line with the initial guidance of mid-swaps flat-area, equating to a spread of +38.3 bps over the Bund 4.25% due July 2018.

The final orderbook reached over €7 billion via over 170 orders, marking the scale and exceptional granularity of the demand. Large interest from Central Banks and Official Institutions provided a solid foundation, complemented by treasuries – both Corporate and Financial. Lead and co-lead orderbooks did not overlap, with cooperative and savings banks distribution in core Europe providing additional support to the issue. Geographically, demand from outside EU contributed a relatively high share compared to EARNs transactions in recent years, highlighting growing international support to euro-issuance.

Evidence of persistent stability in the EIB Euro curve helped this issue become the first EARN to price through mid-swaps since July 2008.

Composition* of demand for the EARN issue:

By Country By Investor Type
Asia                                        45% Central Banks and Official Institutions 53%
Europe/Other                           24%
United Kingdom                        13% Bank & Corp Treasuries                 38%
Scandinavia                              12% Asset Mgmt & Insurance                9%
MENA                                        6%

*after allocation

With this transaction, EIB has achieved EUR 15bn or 21% of its EUR 70bn 2013 funding programme. Total EARNs outstandings have reached around EUR 136 billion across 25 lines.

Comments on the issue:

“The solidity of the market context and the strength of interest in the EIB EUR benchmark product were both soundly demonstrated by this transaction. Noteworthy features of the transaction included the scale and granularity of the orderbook, the volume of orders received from non EU-based investors, speed of execution and a return to pricing through swaps.”
Bertrand de Mazières, Director General of Finance at the EIB.

“EIB should be congratulated for the success of this 5-year EARN and for spotting this window of issuance. It is a fantastic achievement to get a book in excess of EUR 7 bn and to price a  EUR 5 bn EARN at a tighter spread than the initial guidance, in a week where the SSA sector witnessed a total amount of syndicated issuance over EUR 20 bn. This highlights the strength of the EIB credit and its broad appeal to investors,”
Pierre Blandin, Head of SSA Origination at Crédit Agricole CIB

“EIB chose an excellent issuance window in a very crowded market place, gaining a distinct first mover advantage in the 5 year maturity bucket where investors have been starved of high grade benchmark supply.  As always, EIB attracted an impressive list of central bank reserve managers and international bank treasuries, capitalising on the strong bid for liquidity buffer assets.”
PJ Bye, Head of SSA Syndicate at HSBC

“Stability. Credibility. Fraternity.  Issuance of a €5bn EARN, at the product’s tightest spread since 2008, into a market already well-supplied by its peers reflects that investors recognise the stability of EIB spreads and its credit.  Successfully printing such a large benchmark so close to successful supply from other supranationals demonstrates that these large-scale funding programmes can co-exist orderly in the capital markets.”
John Lee-Tin, Head of SSA DCM at J.P. Morgan

“Even in yield hunting environment EIB showed once again its capabilities to attract strong and well diversified demand.  Pricing a new 5-year inside the swap curve with a healthy book and quick execution are a testament to EIB’s strong brand recognition and the high degree of confidence investors have in the EIB credit.”
Pietro Bianculli, Head of Syndicate Italy/SSA FIG at UniCredit

Summary Terms and Conditions for the new Bond Issue
Issue Amount EUR 5 billion
Pricing Date 17 January 2013
Payment Date 24 January 2013
Maturity Date 13 July 2018
Issue/Re-offer Price 99.553%
Re-offer Yield 1.085%
Annual Coupon 1%
Re-offer Spread Mid Swaps – 1 bp
Format EARN
Listing Luxembourg

EIB funding strategy and results

The Bank’s funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity. In 2012, the EIB raised EUR 71 billion, and it plans to borrow EUR 70 billion in 2013.

Background information on EIB

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. The Bank’s strong credit standing is underpinned by exceptional asset quality, a strong capital base, firm shareholder support, conservative risk management and a sound funding strategy.

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