Maria Cannata, head of public debt
What have been the major challenges this year?
This year has not posed any particular problems for us. Although conditions have been unfavourable because of volatile equity markets, it has not affected our financing programme. We have, in fact, benefited from two positive events.
The first, affecting our domestic programme, has been the reform of the withholding tax system in Italy. This has attracted a lot of new investors because the process of gaining eligibility has become simpler. In addition, it has led to an enlargement of the investor base because we can now define more investors as exempt of witholding tax.
For example, this includes institutional investors such as French Sicavs or Luxembourg funds that were previously not eligible to receive the gross yield.
The second was our upgrades by Moody's and Fitch earlier this year. This had a positive effect on our spreads versus other sovereign issuers in Europe. The upgrades have not affected our funding target or strategy, but it made placement of our securities easier, with more convenient conditions.
What has been your strategy this year?
We decided after September 11 to adopt a barbell type of strategy. We will continue to cover longer maturities while avoiding the most costly points on the yield curve for us. This does not mean that we will stop issuing debt instruments at these points but we would only reduce the amounts offered.
In addition, we want to keep the flexibility we enjoy from issuing FRNs. We remain the only sovereign issuer offering FRNs on a regular basis.
And so combining longer term bonds with FRNs, we have adopted a more flexible approach to the market, also introducing new instruments, as in February this year, when we offered a new maturity - the 15 year BTP. We have extended this approach to the international market.
We have also maintained our commitment to our dollar programme. We have recently issued a five year bond, completing our minimum commitment to the programme in terms of coverage of the most important maturities. In the first half of this year, we issued three year and 10 year bonds. With the recent five year issue, we have completed our curve in dollars.
Have you finalised your dollar issuance plans?
For the moment we have only made public our intention to cover the three most important maturities: three, five and 10 years.
However, we are now considering whether it would be better to give the market a more regular schedule in the future. We are currently studying the possibilities of an issuance calendar and at the end of the year, when we will publish the new guidelines for the issuance strategy, we will clarify our position.
Have you hit your funding target for this year?
We have met the minimum requirements of our dollar programme for 2002. If, however, there is evidence of strong and robust demand in some particular segment later in the year, we do not exclude the possibility of another issue.
In general, regarding our total programme of issuance, we have completed more than 75% of our gross issuance. There is the possibility of further, opportunistic issuance off our MTN programme but the remaining 25% will mostly be covered domestically.
Are you looking to access any new markets and expand your investor base?
This year we have observed an increase in distribution in Asia and the US, specifically for our BTP and dollar programmes. We also have information about new accounts opened by the central depositor as a result of the withholding tax reforms.
We now are more or less present in all the global markets. We will maintain our presence in these markets and will remain in the most important currencies. Niche markets will only be considered on an opportunistic basis. For the moment, we have not done anything in these markets.
But even if there were interest for our name there, the size is not relevant.
How important are roadshows?
We want to give more and more importance to these aspects of our issuance policy. We are always trying to improve communication with the investment community either through the press or through our website.
We also aim to increase our contact via roadshows, conference calls and bilateral meetings, to increase transparency and maintain direct dialogue with investors to help us accommodate their particular requirements.
What impact have EuroStats' new accounting methods had on your funding?
There has been no real effect on our issuance strategy as a result of these decisions. This is because the aims of our asset backed programmes are more to do with efficiency and we are very careful about the financial structures of these instruments.
Although we are active in this market these securities are not used for debt management.
The only changes we may expect are that we may issue bonds with longer maturities and that some ABS bonds will not be triple-A rated. These changes have had no effect on our funding target
How do you choose the lead managers for your syndicated issues?
For our domestic instruments, which we started this year with the 15 year BTP, we only choose from among our specialist primary dealers. We take into consideration their performance as well as their distribution capabilities for that particular instrument.
A privileged treatment is reserved for specialists for our international offerings as well, even if we have to take into account other factors.
For dollar denominated issues, we also choose from a list of dealers committed to our dollar programme.
For this market we are particularly concerned with the quality and capacity of distribution the banks are able to offer.
We also consider the strength of each bank in particular sectors, as well as the active behaviour by the bank in terms of relationship, making proposals and in their efforts to meet our particular requirements and funding target.
We also take into consideration the service they offer and whether or not they have analysed the results of our previous operations.
Overall the most important strength a lead manager can demonstrate for us is its capacity for broad geographical distribution and the quality of investors they are able to reach.
For the EuroMTN programme, we have a list of dealers, but in general we receive proposals for new issues and based on these we choose the banks making the best offers.