Final terms of the transaction
Issuer: European Bank for Reconstruction and Development (EBRD)
Rating: Aaa / AAA / AAA (all stable) (Moody’s / S&P / Fitch)
Issue Amount: USD 925mn
Pricing Date: 6th February 2020
Settlement Date: 13th February 2020
Maturity Date: 13th February 2025
Re-Offer Price/Yield: 99.818% / 1.538% SA
Coupon: 1.500% (semi-annual, 30/360)
Re-offer vs. mid-swaps: +7bps
Re-offer vs. UST: +7.65bps
Joint Bookrunners: BoA Securities, Crédit Agricole CIB, Morgan Stanley
Context of the transaction
On Thursday 6th February 2020, the European Bank for Reconstruction and Development (EBRD), rated Aaa (stable) / AAA (stable) / AAA (stable), successfully issued its largest ever green bond at launch, a new USD 925mn 5-year Global (SEC Exempt) Environmental Sustainability Bond, EBRD’s first benchmark in 2020. The issue is due on 13th February 2025, pays a semi-annual coupon of 1.50% and priced with a spread of 7bps above mid-swaps, equivalent to CT5+7.65bps, the tightest spread to US Treasuries for EBRD in recent history and amongst the tightest prints in the SSA peer group.
This transaction represents EBRD’s first Environmental Sustainability bond issuance this year and it is the first USD green bond in EBRD’s peer group of the highest quality Supranational issuers. As one of the pioneers in the Green Bond market, EBRD’s reputation and credibility is firmly established among the Sustainable and Responsible Investment (“SRI”) community, who welcomed this opportunity to add the EBRD name to their portfolios. In fact, the issue was upsized to USD 925mn from an original USD 500mn target in order to accommodate high quality green demand.
The final book saw 56 individual investors of which 17 were new to EBRD. EBRD issue also attracted demand from other high quality Central Bank and Bank Treasury investors, with orders in excess of USD 1.3bn.
EBRD Green Bond Programme
The proceeds of EBRD's environmental sustainability bonds are earmarked to support a specific portfolio of environmentally sustainable projects (the Green Project Portfolio or GPP), which currently comprises investments in the following 5 areas: Energy Efficiency, Renewable Energy, Water Management, Waste Management and Air Pollution Prevention & Sustainable Transport. EBRD first started issuing Green Bonds in 2010 and its Green Project Portfolio includes 356 projects worth a total EUR 4.4bn based on operating assets as at 30th Sep 2019. Since its entry into the Green Bond market, EBRD has issued 92 ESBs totalling EUR 5.2 billion equivalent.
Launch and execution process
Taking advantage of a very conducive market backdrop, the mandate was announced at 7pm London time on Wednesday 5th February for a USD 500mn 5-year Global (SEC Exempt) Environmental Sustainability bond. IPTs were simultaneously released at MS+8bps area.
The Joint Lead Managers opened books at 8am London time with an official price guidance of MS+8bps area, in line with IPTs.
Momentum grew rapidly, with books reaching in excess of USD 725mn within 45min of marketing, at which point the spread was set 1bp tighter at MS+7bps. Shortly after, books were communicated over USD 1bn with EMEA/Asia books to close just before 9.50am London.
Orders continued to build up through the US morning, reaching over USD 1.3bn by 12.30am London. The overwhelming demand for the new issue allowed EBRD to upsize the transaction to USD 925mn from the USD 500mn initially communicated, making it the largest EBRD Green Bond at launch.
Demand for the Environmental Sustainability Bond was very strong, and comprised some very large orders from high profile green buyers out of Europe, Asia and Americas. Overall, EBRD attracted over 56 investors of which 17 were new investors, highlighting the success of this transaction in diversifying the supranational’s investor base.
- EBRD’s USD 5-year Green Bond priced at 5.25pm London time with a semi-annual coupon of 1.50% and an issue price of 99.818%, to give a spread of 7bps over mid-swaps, equivalent to CT5+7.65bps.
Geography Investor Type
EMEA 74.4% AM/Pens/Ins 34.4%
APAC 20.1% Banks/Corp 33.3%
US/Canada 5.5% CB/OI 32.2%