Amount:€2bn Reg S only
Maturity:10 January, 2121
Spread at reoffer:mid-swaps plus 111bp; 105.43bp over the 0% August 2050 Bund
Launched: Tuesday, January 5
Payment date: January 12
Joint books: Barclays, Deutsche Bank, HSBC, JP Morgan, Nomura
It was a copycat from last year’s transaction, which was almost a year to the day.
We have the same approach. In this part of the curve, we only start a new line in the same maturity when our current lines have reached the target size of €3bn.
We announced a benchmark size, which is generally understood to be €500m, but it turned out to be much larger than that.
What stood out was the number of investors in the deal. With more than 100 investors, it shows that 100 year bonds are more of a mainstream product now. There were a number of new accounts which we have not seen before, certainly not in our previous 100 year bonds.
Two years ago, when we did our first such bond, the core investor base was insurance and pension funds and some asset managers seeking duration or yield. But now there’s a much broader investor base.
With a book of more than €3bn, we sized the deal at €2bn, which we could accommodate in terms of liquidity management while leaving some room for taps.
We priced against the 60 year euro swap rate for our previous 100 year bonds because it is the longest one available.
But for this transaction, we used the 50 year as it was more robust, less volatile and also eligible for central clearing.
We felt fair value was in the context of plus 106bp-107bp based on the quotations for our 2120 line, so around a 5bp new issue concession.
We have a refinancing target of around €15bn for this year. But we may have additional needs in the context of the pandemic, which could be another €5bn or so.
There is a breadth of demand in the euro market and I’m particularly astonished by the response of the Land NRW 100 year, which was sold on the second day of business in the new year.
More issuers are willing to explore ultra-long issuance, which is anything between 50 and 100 years. But 100 years is quite special, so only a handful of issuers will consider this maturity either through a private placement or syndication.
Over the last year, we have developed a real money investor base in 100 years. We started with 20 to 30 investors and now we have more than 100. We have heard from a lot of real money investors with 50 to 60 year lines who are now willing to extend to buying 100 years.
Distribution by investor type
Fund managers and asset managers 62%
Insurance companies 14%
Leveraged funds 6%
Pension funds 3%
Central banks and official institutions 2%
“…it’s a huge trade and shows more accounts are willing to sign up and chase yield of less than 1%.”
“…to get €2bn is incredible. We talked about investors going for duration, but this is something else.”