Rating: A2/A+/A
Amount: €4bn Reg S
Maturity: 15 May 2028
Issue/reoffer price: 99.569
Coupon: 0.9%
Spread at reoffer: mid-swaps plus 2bp, August 2027 Bund plus 50.6bp
Launch date: Wednesday, January 3
Payment date: January 10
Joint books: Citi, Danske, Davy, JP Morgan, Morgan Stanley and Nomura
Borrower’s comment:
We’re very pleased with the transaction. We had a target of €4bn which is in line with our last two deals. That accounts for around 25% of our funding target for the year.
We didn’t do a 10 year last year, so investors were expecting that we’d return to what is, after all, a core benchmark maturity. Our 2026s are getting quite young and already have over €11bn in issuance, so it made sense to get a new 10 year benchmark.
Fair value is always a difficult question with the market moving around during the day, but I think at our final level of mid-swaps plus 2bp, we were offering around 1bp-2bp new issue premium.
The investor book was very similar to our previous ones, similar to what we expected to see.
It was a large book but we are generally at or over €10bn in recent times. It’s not a surprise. There are hedge funds in the book, which we scale back considerably, so they tend to bid for larger amounts.
Obviously the ECB is in the background, but we didn’t hear any concern over the tapering of QE or the possibility of it ending.
From here, auctions will take over. This deal was our core syndication target for the year so the focus will be on auctions. We are always opportunistic around other options such as inflation linkers and private placements, but it’ll depend how the year evolves.
Bookrunners’ comment:
A really exceptional deal. It’s another sign of continuing rehabilitation of Ireland. Its paid back a lot of loans and investors are clearly very keen on the name.
There’s a lot of cash out there, and we ended up with a book north of €14.5bn.
We’re still in an environment where investors are requiring something of a new issue premium, particularly in euros because of the volatility and the coming supply. We had fair value around flat when we came out with initial price thoughts of plus 5bp and, when we priced at 2bp, we saw fair value at minus 1bp to minus 1.5bp, so we started with a new issue premium of 5bp and ended around 3bp.
I saw it trading a bit tighter on Thursday morning, but there hasn’t been a great deal of turnover so far.
Geographical distribution
UK 38%
Americas 15%
Germany/Austria 14%
Ireland 11%
Nordics 10%
Other Europe 9%
France 2%
Rest of world 1%
Distribution by investor type
Asset managers 37%
Banks 24%
Pension funds/insurance 19%
Hedge funds 14%
Central banks/official institutions 6%
Market appraisal:
“…I think the market was blindsided by the result of this deal. It’s very impressive. Although, the €14bn book is a bit ridiculous. A lot of that is hedge funds inflating order books — which is what you see with every sovereign, there’s a lot of fluff.”
