Has your three year benchmark been pulled because of some credit ratings small print? No idea when that problem will be resolved but need to raise cash now? Easy — just launch the first ever syndicated sub-one-year deal and watch the orders flood in.
The Moody’s downgrade of France to double-A last week rendered the EFSF’s own triple-A rating null and void, meaning it had to scrap its planned three year benchmark — quite a worry when it has the small matter of €3.6bn still to raise this year.
But the EFSF answered a technical problem with a creative solution: by launching a 364-day deal on Tuesday, the bond fell under short term ratings — and as France’s P-1 rating was unaffected by last week’s Moody’s action, the stumbling block was removed.
Any questions over how investors would respond to what was effectively a new instrument were answered when the EFSF pulled in nearly €9bn of orders in under two hours, with pricing set 1bp tighter than the lower end of guidance.
The €7bn subsequently allocated has not only completed its 2012 target but also taken a €3.4bn chunk out of next year’s business. It is also the EFSF’s largest ever deal.
SSA bankers have been pleading for well-funded issuers to stop planning their Christmas shopping and do some prefunding while conditions remain favourable.
The EFSF showed that with a bit of quick thinking and reaction to events, it’s possible even for an issuer with a €3.6bn hole in its funding not only to plug that but also to get well ahead for next year.
The eurozone’s temporary bail-out fund has come a long way from its dog of a deal in August last year when bankers labelled it a “party pooper” for effectively shutting down the all important September funding season for other issuers with its poorly received 10 year.
But it has now truly asserted its status as a top tier issuer. Far from putting everyone on a downer, it has become the life and soul of the party. Other issuers should accept their invitations and join the fun.