FRANKFURT (MNI) – Europe’s rescue fund, the European Financial
Stability Facility (EFSF), announced today that it successfully placed
its first bond issue for an amount of E5 billion at a borrowing cost of
2.89%.
The issue is intended to provide the first installment of the EU’s
contribution to the EU-IMF aid package for Ireland. The funds, minus set
asides for the EFSF’s reserves and cash buffer, will be disbursed to
Ireland February 1.
The verbatim text of the EFSF’s statement is below:
European Financial Stability Facility (EFSF) today placed its
inaugural bond for an amount of E5 billion as part of the EU/IMF
financial support package agreed for Ireland.
The issuance spread was fixed at mid-swap plus 6 basis points. This
implies borrowing costs for EFSF of 2.89%. Investor interest was
exceptionally strong, a record breaking order book of E44.5 billion from
more than 500 investors. Investor demand came from around the world and
from all types of institutions. Very strong demand came from Asia. The
Government of Japan purchased over 20% of the issue, reflecting its
early commitment with the intention of contributing to European
financial stability.
Klaus Regling, EFSF’s CEO said, “I am delighted with the outcome of
our inaugural issue. The huge investor interest confirms confidence in
the strategy adopted to restore financial stability in the euro area.”
Citi, HSBC and Societe Generale acted as lead managers for this first
EFSF issue and Deutsche Finanzagentur, the German Debt Management
Office, acted as Issuance Agent. Klaus Regling expressed his gratitude
to all participants for the successful placement of EFSF’s first issue.
The funds will be disbursed to Ireland on 1 February (5 business
days settlement). This will match Ireland’s request for a loan of E3.3
billion. The difference between the amount raised on the markets and the
amount disbursed to Ireland is due to EFSF’s credit enhancements using a
cash reserve and loan-specific cash buffer to secure a triple A rating.
The cash reserve comprises a margin rate and a one-off service fee. It
is also explained by EFSF’s structure which requires both the principal
and interest to be covered by guarantees.
The final cost charged to Ireland and the exact loan amount will
only be known once the cash reserve and the loan specific cash buffer,
which are retained by EFSF, have been reinvested. This is the second
transaction in support of the financial assistance programme for
Ireland.
On 5 January 2011, the European Union (EU), under the European
Financial Stabilization Mechanism (EFSM), successfully placed a E5
billion bond issue at mid-swap plus 12 basis points. Over 2011 and 2012
EFSF will in total raise up to E26.5 billion in the capital markets as
part of the Irish support programme which will include two further
benchmark bonds of E3-5 billion per transaction in the current year. In
2011 the EU under the EFSM will raise up to E17.6 billion and in 2012 up
to E4.9 billion.
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