The European Investment Bank (EIB) broke through the boundaries of supranational issuance last July with a €4 billion 15-year bond
The issue stood out by launching the EIB into the so-called "super-long" part of the high-grade euro bond market.
"We are delighted to see such a strong response from the market to EIB's
progression into the 15-year euro benchmark bracket, particularly given that
benchmark issues of such size with a 15-year maturity have otherwise been the preserve of sovereigns," says Rene Karsenti, director-general of finance of the
EIB in Luxembourg.
"We believe this is an important acknowledgement of EIB's sovereign-class status in the euro market. The level and quality of demand suggests confidence in the bank's strategic and market-sensitive approach to this innovative transaction."
The deal was part of the EIB's Euro Area Reference Note (Earn) programme curve, now consisting of 13 benchmarks worth an aggregate of about €63 billion and with maturities ranging from 2005 to 2020. In April 2005, the bank announced its intention to go one step further, launching a 30-year transaction.
The bank, the European Union's long-term financing institution, proved that it had accurately judged investor demand for longer-dated euro government paper. The deal, lead-managed by ABN Amro, Citigroup and Deutsche Bank, was priced at 98.958 and achieved a spread of 13bp over the relevant sovereign reference in 15 years, the French government OAT due April 2019. The issue pays a coupon of 4.625%.
Scarcity value meant that the deal attracted a strong order book, with demand exceeding €7 billion. Barbara Bargagli-Petrucci, head of the EIB's capital markets department, said the order book was so strong that the deal was increased to the top end of the €3-€4 billion planned range. "We did not want to scale these clients back and create a technical trading level," she said.
Over the past five years the bank had built out its curve to a 2013 maturity. The 15-year issuance was the next obvious step.
"The success of this transaction is an indication of broader market developments. With this transaction EIB responded to evidence of structurally driven growth in demand in this maturity area, with drivers including pension fund reform and accounting changes," says Karsenti.
"The transaction also underlines EIB's standing as a sovereign proxy and reflects its positioning as the consolidated European sovereign issuer, thanks to
ownership by EU member states, which in turn offers investors a unique means of diversification."
The bulk of the deal, 70%, was bought by fund managers, insurers and pension funds. Distribution was mainly to European accounts, which took 89% of the bonds; 22.5% to Germany, 15% to France, 15% to the Netherlands, 13% to the UK, 7% to Italy 7%, the rest 9.5%. Asia and Japan contributed 6% and the US 6%.
Issuer: European Investment Bank
Date of issue: July, 2004
Amount: E4 billion
Maturity: 15 years
Coupon: 4.625%
Credit ratings: Aaa (Moody's) AAA (S&P)
Lead managers: ABN Amro, Citigroup, Deutsche Bank