Rating: Aaa/AAA/AAA
Amount: $2bn global
Maturity: 20 April 2015
Issue/re-offer price: 99.991
Coupon: 2.75%
Spread at re-offer: mid-swaps plus 1bp; 15.9bp over the 2.5% March 2015 UST
Launch date: Monday 12 April
Payment date: 20 April
Joint books: Deutsche Bank, HSBC, UBS
Borrower’s comment:
This was a great deal. We closed the book after four hours — when it reached $2.5bn — to avoid allocation problems. It did achieve fantastic pricing; in any particular market, our objective is to price at the tight end of the supra range. The track record of how IFC has handled its global programme over the past 10 years works in our favour.
We have worked hard at investor relations, explaining the IFC story and the process to do deals that are book-built with a diversified investor base throughout the main regions. We eliminate spivs from the book and commit not to tap global issues.
There is always a small syndicate of relationship banks that actively support IFC in both primary and secondary, which we monitor closely, and we speak directly to the sales forces of the leads to make sure the deals are correctly positioned.
Having the IFC credit so established and recognised in these markets is important to all aspects of our business so it is worth being consistent. So far, IFC has issued only one global a year so there has been a particular focus.
Given today’s market reality, we were concerned about the tight Treasury spread as well as all the noise around sovereigns and the way the swap spread was reacting. Fortunately, investors have come to understand both the strength of the IFC credit and the global programme.
IFC came through the crisis with its balance sheet remaining very strong: leverage of only 2.1:1; capital adequacy of about 44%; and about liquidity of over 65% of the next three years’ cash invested in AAA paper. The balance sheet is rock solid so that we can be proactive on the asset side, making investments to promote development through the private sector.
The majority of this global was sold, as normal, to central banks and official institutions (73% of the issue); but banks and corporate remained involved (13%), together with funds (9%) and insurance companies (5%).
In terms of geographical distribution, 53% of the paper went to Asia, 28% to Europe/Middle East and surprisingly just 20% sold into the US with real money involved.
Bookrunners’ comment:
This was an excellent transaction. It wasn’t a blow out trade like last year because Treasury spreads are so tight and some investors who bought last year’s issue at 137.5bp over Treasuries and 78bp over mid-swaps couldn’t quite make the leap.
Nevertheless, there is a lot of loyalty out there for IFC and it was important to achieve a balanced distribution with the US and Europe involved, as well as the less price-sensitive central banks.
We really pushed the boundary on the price. It is the tightest five year versus Treasuries since the German five year in 2005, which was priced at Treasures plus 12bp.
The 20% US distribution was more than we expected, especially as it was 7bp-8bp through GSEs, and we had a range of accounts, including state money, asset managers and insurance companies. We also had a few smaller bank treasuries in there.
Offshore, we had 73% central banks and official institutions spread over Asia, Europe and the Middle East and Africa.
We had developed a roughly $700m book of indications of interest on Friday afternoon in New York so we were fully confident going into Asia on Monday morning, tightening the original price whisper of mid-swaps plus 2bp-4bp area to mid-swaps plus 2bp.
When we opened books officially in the London morning, a lot of the indications of interest were confirmed and within two hours, the book grew to $1.5bn. The intention was to raise a minimum of $1bn so already that was a great result. Finally we received over $2.5bn of orders, allowing IFC to print a solid $2bn deal.
IFC did not need the money. This transaction lifts the level of funds raised this year to $9bn out of its $9.5bn target for new funding. The financial year ends on June 30, and IFC has a number of other trades in the background, but the quality of the book and the fact that they could get considerable strategic value out of the issue, has set a new mark for the supranational community.
The transaction was very well prepared in that it was announced in advanced and the issuer went to see investors, which created a lot of momentum around the trade.
IFC has the advantage that there is a very strong bid for issuers with no link to Europe. Most of IFC’s business is outside Europe and from both the business perspective and shareholder perspective, there is limited European exposure.
Also IFC is the only supranational with fully paid in capital, which, in an environment where investors are looking at supranational shareholdings in more detail, differentiates IFC from its peers.
Distribution by investor type
Central banks/official institutions 73%
Banks and corporates 13%
Fund managers 9%
Insurance companies 5%
Geographical distribution
Asia 52%
EMEA 28%
US 20%
Market appraisal:
"...from the outset, this looked very good. Initial guidance was the plus 2bp area for a minimum $1bn trade so printing $2bn at plus 1bp is an excellent result.
With EIB issuing a three year at plus 5bp, getting a five year done at plus 1bp speaks volumes about how well the IFC name is valued by the investor base. It also says that non-European names have a slight edge at the moment."
"...it’s amazing that they managed to place 20% of this issue in the US since the deal was priced some 8bp through GSEs. But IFC has a huge central bank following, which is why they can get such tight pricing."
"...I thought that this was an excellent trade, particularly the timing, although if I were a cynic I would say their timing is more luck than judgment as they always do a deal at this time of year. However, they managed to catch the sentiment of investors trying to avoid anything that could be perceived to have some potential links to Greece and increasingly EIB and KfW are perceived to have those links.
The continuing turmoil around Greece helped the deal. IFC is a high quality name and it is a supra with an extremely long history in the dollar market so it has built up a loyal following.
It is also perceived as a safe harbour from headline risk so it is not surprising it went so well.
The pricing was also spot on."
"...IFC is very consistent in its issuance strategy, issuing just the one global a year and the success of this deal shows how effective that strategy is. The deal was nicely oversubscribed, they were able to price through guidance and place bonds with a great group of investors.
Couldn’t be better really."
