ESM open to pre-funding after bumper debut bond
LONDON, Oct 10 (IFR) - The European Stability Mechanism is considering starting to pre-fund for next year, after frenetic investor interest for its debut bond pushed it to print a EUR7bn five-year bond on Tuesday to meet demand, it said in an emailed statement on Thursday.
The permanent euro rescue fund was scheduled to issue EUR9bn in bond markets this year, but has no objection to making an early start on the EUR17bn it needs to raise next year if market conditions allow.
"So far, we haven't decided if our next deal should be an auction or a syndication. We may as well begin to pre-fund the EUR17bn ESM funding requirement for next year," said Christophe Frankel, CFO and deputy managing director of the ESM.
The ESM was surprised by the quality of the near EUR21bn of orders placed for its inaugural five-year on Tuesday, and had to satisfy at least a third of the interest, leaving it with only EUR2bn to raise to complete its 2013 funding programme.
"The EUR7bn final size of the issuance was larger than we initially expected but with such a good order book we decided to respond to investors and give a large and liquid benchmark from the very beginning," added Frankel.
ESM's predecessor, the temporary rescue vehicle the European Financial Stability Facility, was granted the ability to pre-fund back in 2012, but has stuck fairly stringently to its published funding programmes. This year, at the beginning of every quarter, it even started to publish the exact weeks it planned to issue and is on course to complete its EUR58bn of funding scheduled for this year.
The EFSF is responsible for administering bailout monies for Greece, Ireland and Portugal, while the ESM is currently funding a credit line to recapitalise Spain's banks and a sovereign bailout for Cyprus. As of July 2013, ESM is now responsible for any future bailouts. (Reporting by John Geddie, editing by Alex Chambers, Julian Baker)
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