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UPDATE 3-EFSF matches record for largest supranational bond
January 15, 2014 / 11:02 AM / in 4 years

UPDATE 3-EFSF matches record for largest supranational bond

(Adds pricing details, distribution)

By John Geddie

LONDON, Jan 15 (IFR) - The European Financial Stability Facility matched its own record for the largest supranational bond issue on Wednesday, after receiving EUR12bn orders from investors, said a bank managing the deal.

The eurozone bailout fund, rated Aa1/AA/AA+, printed EUR8bn of a new 1.25% five-year bond, maturing January 2019, at a spread of mid-swaps plus 7bp.

“The deal captured demand from a lot of bank treasuries, but also central banks and hedge funds as well,” said one banker managing the debt sale.

The transaction - which is EFSF’s first of the year - matched the borrower’s EUR8bn sale of a five-year bond last April, the largest supranational bond issue on record.

It also puts the EFSF well on its way to issuing a planned EUR34.5bn of medium to long-term debt this year.

The EFSF is committed to funding and refinancing bailouts for Ireland, Portugal and Greece, while its permanent successor, the European Stability Mechanism, is committed to funding a bailout for Cyprus and a bank recapitalisation programme for Spain, as well as any future bailouts.

The ESM plans to raise EUR17bn of funding this year.

HSBC, Morgan Stanley and RBS managed EFSF’s latest deal, originally marketing the bonds on Tuesday afternoon with initial price thoughts of mid-swaps plus 9bp area, but later revising formal guidance to plus 8bp area on Wednesday morning after interest topped EUR5bn.

The final spread of 7bp was set after just over an hour of book-building, with orders in excess of EUR8.5bn.

One lead bank said the new bond offered investors a slim 2bp new issue premium, based on fair value calculations of mid-swaps plus 5bp, taking into account where EFSF’s outstanding bonds were trading in the secondary market.

Final distribution was split between the eurozone 41%, rest of Europe 4%, UK/Switzerland 15%, Asia 37% and other 3%. By investor type, the split was central banks/official institutions 41%, banks 38%, asset managers/fund managers 15%, insurers/pension funds 4% and other 2%. (Reporting by John Geddie, Editing by Helene Durand, Sudip Roy and Julian Baker)

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