Rating: Aaa/AAA/AAA
Amount: £400m
Maturity: 25 January 2011
Issue/re-offer price: 99.851
Coupon: 4.75%
Spread at re-offer: 50bp over the 4.25% March 2011 Gilt
Launch date: Wednesday 16 January
Payment date: 25 January
Joint books: Barclays Capital, Royal Bank of Scotland
Bookrunner’s comment:
There is no doubt that there has been good demand since the beginning of the year at the short end of the sterling market, even though the currency has not performed so well.
However, sterling remains a yieldy product and offers an attractive yield play for international and domestic investors. What’s more, investors can get an attractive yield and coupon at the short end of the curve.
There is no question, given how risk averse investors are at the moment, that they prefer to park their money at the short end of the curve. The demand is very much concentrated in the short dated, high quality product spectrum.
We have seen quite a few taps from the EIB and KfW pricing last week and this, and RFF offered a nice pick up against those deals. Indeed, at 50bp against Gilts, it compared well against KfW which priced at 42bp and EIB at 38bp. So investors were able to pick up 10bp against other European agencies, which is very attractive given that RFF is a high quality issuer and a French EPIC.
The minimum size the borrower wanted to do was £200m, with an aim of printing £300m. Within a few hours of bookbuilding, we had over £300m of orders and asked the issuer if we could increase the deal.
RFF got board approval and we finally went subject on the book when we approached £400m. This transaction was RFF’s first short dated sterling issue. In the past they have tended to price longer dated transactions.
The vast majority of orders were from buy and hold investors with 43% going to central banks, 37% to funds, 13% to official institutions and 7% to banks. UK and Ireland were the dominant region at 49% with Asia taking 29%, Scandinavia 5%, Switzerland 4% and other 13%.
Market appraisal:
"...this deal came rather as a surprise since RFF generally funds at the long end.
With a spread of 50bp over the Gilt, it was a very attractive proposition. It was around mid-swaps less 11bp to 12bp, which is cheap for a triple-A three year.
It is no wonder they got £400m done."
