26 April 2012

EU €2.7 billion 10-year bond for Portugal strongly oversubscribed

Both transactions together bring the average maturity of the EU loans to Portugal from 10.8 years to 12.2 years. The transaction was carried out by the European Commission on behalf of the EU under the European Financial Stabilisation Mechanism (EFSM).

The new 10 year operation, concluding EU's funding activities for the first half of 2012, is a further successful EU issuance, following bonds with 30-, 20- and 26-year maturities in January, February and on 17 April 2012.

Despite a very strong order book of €7.8 billion, the size of today's transaction was limited by the overall funding requirement of Portugal. This allowed to price at mid-swaps +56 basis points, tighter than the initial guidance of +60 area.

The €2.7 billion bond matures on 4 April 2022, pays a coupon of 2.75 per cent, and yields 2.794 per cent. Funding cost will be passed on to Portugal without any margin; the disbursement to Portugal is foreseen for 4 May 2012, the settlement date of the bond.

The maturity is determined by the targeted maximum average maturity of 12.5 years for loans to Portugal. The Commission considers the successful issuances as a strong sign of confidence in the EU as a prime issuer and in the stability measures of the joint EU/IMF programmes.

Geographically, the most demand came from within Europe, where Germany had 28 per cent of the allocation, followed by UK/Ireland (17 per cent), France (13 per cent), the Nordic Countries (9 per cent), Benelux (8 per cent) and Switzerland (5 per cent). Other Europe had 8 per cent. Outside Europe, 6 per cent was allocated to Asia, 5 per cent to US offshore and 1 per cent to the rest of the world.

In terms of investor type, asset managers were in the lead with 38 per cent of the allocation, followed by insurances/pension funds (23 per cent), Central Banks/Official Institutions (18 per cent), banks (18 per cent) and others (3 per cent).

Joint lead managers were Crédit Agricole CIB, DZ Bank, J.P. Morgan, Morgan Stanley and Société Générale.

Co-leads were Bank of America/Merrill Lynch, Citibank, Commerzbank, Credit Suisse, Royal Bank of Scotland, Santander, UBS and Unicredit.

Press release

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