Terms of the transaction
Issuer: European Bank for Reconstruction and Development (EBRD)
Rating: Aaa / AAA / AAA (all stable) (Moody’s / S&P / Fitch)
Documentation: Issuer’s Global MTN programme
Format: Global SEC exempt
Issue Amount: GBP 450,000,000
Pricing Date: 24th July 2018
Settlement Date: 31st July 2018 (T+5)
Maturity Date: 31st July 2023
Coupon: 3m£+5bps, Act/365, Modified Following
Target Market: Professional & Eligible Counterparties (all distribution channels)
Joint Bookrunners: Barclays, Nomura (B&D), Scotiabank
On Tuesday, 24th July, the European Bank for Reconstruction and Development (EBRD), rated Aaa (stable) / AAA (stable) / AAA (stable), successfully issued a £450 million 5-year floating rate note. The new bond, which is due on the 31st July 2023, pays a coupon of 3m£+5bp and priced at a reoffer price of 100%, equating to a discount margin of 3m£+5bp. The transaction marks EBRD’s inaugural GBP-denominated floating rate note, and first GBP-denominated syndication new issue for the borrower since May 2014. Barclays, Nomura and Scotiabank acted as Joint Bookrunners.
The transaction was upsized from an initially targeted minimum of £250mn on the back of strong demand for 3m£ Libor-linked paper from the investor base. As only the third SSA Sterling floating rate note linked to 3m Sterling LIBOR so far in 2018, investors in this sector have had limited opportunities to buy notes linked to a 3m forward looking rate. The 5-year tenor was chosen to match current investor preferences, particularly from Bank Treasury investors. Given that the continuation of Sterling LIBOR on the current basis is not guaranteed after 2021, the transaction included LIBOR fall back language and risk warnings, which were referenced in the screen announcements. Denominations were chosen to underscore the targeting of institutional investors.
Taking advantage of the positive market environment and the favourable cross currency basis market, EBRD announced its mandate at 16:00 GMT on Monday, 23rd July for a new GBP 5-year 3m£ Libor linked FRN transaction due 31 July 2023 (Global SEC Exempt format), with initial price thoughts (“IPTs”) of 3m£+5bp area.
At 8:07 GMT on Tuesday 24th July, the Joint Lead Managers opened books with official price guidance unchanged from IPTs at 3m£+5bp area, with indications of interest (“IoIs”) in excess of £200mn.
The transaction continued to attract interest from investors, with the orderbook growing in excess of £300mn by 9:21 GMT. This continued throughout the morning, with orders exceeding £440mn by 11:33 GMT. At this point the issuer, in coordination with the Joint Lead Managers, announced that they would set the spread at 3m£+5bp and that the orderbook would close at 12:00 GMT.
With additional orders before the book was closed, the final terms for the transaction were released at 12:52 GMT, setting the issue size at £450mn. At 14:58 GMT, the transaction officially priced with coupon of 3m£+5bp and a reoffer price of 100%, giving a discount margin of 3m£+5bp.
Banks took the majority of the total allocation with 64.5% of the bonds, followed by official institutions with 19.6%, corporates (5.3%), asset managers (5.3%) and local government (3.3%). By geography, the UK led distribution (53.1%), followed by Asia with 19.4%, EMEA (ex UK) (16.4%) and the US (11.1%).
Investor Type Geography
Banks / Private Banks 64.5% UK 53.1%
Official Institution 19.6% Asia 19.4%
Corporate 5.3% EMEA (ex UK) 16.4%
Asset Manager 5.3% US 11.1%
Local Govt 3.3%