Investor enthusiasm for the International Finance Corporation’s annual global dollar bond last April was so strong that the book for the $1 billion, five-year issue was taken to $1.8 billion.
The IFC achieved a truly global distribution, with 38% placed in Asia, 31% in the Americas and 31% in Europe and the Middle East. BNP Paribas, Citigroup and UBS acted as lead managers on the deal.
Following initial price guidance of mid-20s over the five-year Treasury, the transaction was priced at 23bp over.
“Our $1 billion issue is something that everyone understands,” says IFC vice-president and treasurer Nina Shapiro. The deal was always handled carefully, she explained, in terms of marketing, investor relations and distribution, which the market had come to recognize. “Now markets have confidence that we’re consistent, so we’ve been able to increase the size of issue,” she says.
She is delighted with the response to the 2005 issue, especially with the strong response from European and US investors, which exceeded expectations: Asian demand for IFC issues has been typically strong, although it was especially so in 2005.
Central banks bought 50% of the issue, official institutions 15%, fund managers 19%, bank treasuries 8% and pension funds and insurance companies 8%. The bond was placed with 60 accounts globally.
Since 2000, the IFC has pursued a strategy of ensuring a presence in the international markets with an annual benchmark global dollar deal. The once-a-year offering ensures the rarity of the credit, while five consistent years have shown that the total value of issuance will not be increased, so there will be no taps that will cap its performance. Investors could expect a similar spread performance to that witnessed in the past, and had no choice but to get involved in this IFC bond, according to one of the bookrunners.
Shapiro says that issuing the $1 billion global bond was a key element of the corporation’s funding strategy each year. It established a “benchmark” for the IFC in its peer group, and for the rest of the multilateral bank’s market transactions, such as structured financing and local currency issues in emerging markets. The transaction represented at least 40% of the IFC’s borrowing plan of up to $2.5 billion for its financial year, which ended on June 30, 2005.
“After five years of being consistent, the market appreciates that we’re quite predictable,” says Shapiro. “Spring comes, the flowers bloom, and we do our issue.”
Issuer: International Finance Corporation
Date of issue: 26 April 2005
Amount: $1 billion
Coupon: 23bp over the 4% April 2010 UST
Maturity: 15 June 2010
Bookrunners: BNP Paribas, Citigroup, UBS