Case study

Supporting the EU with SSA market’s first 30-year bond of 2023

26 Jan 2023 . 3 min read

EU borrowing focuses on NextGenerationEU programme and support for Ukraine

Borrowing on international capital markets on behalf of the European Union, the European Commission is disbursing funds to Member States under various borrowing programmes. Its largest is the €800 billion “NextGenerationEU” programme, which seeks to support Europe’s recovery from the COVID-19 pandemic through investment in sustainability, digital solutions and resilience. To date around €142 billion has already been disbursed to EU countries.

The €18 billion “Macro-Financial Assistance+” (MFA+) programme is another key fund, providing stable and predictable support to Ukraine throughout 2023. In 2022, the European Commission – on behalf of the EU – disbursed €7.2 billion in emergency MFA loans to Ukraine, and, in January 2023, provided the first €3 billion under the MFA+ programme.

First 30-year transaction for 2023 achieves 10 times oversubscription

Seeking to raise further funds to finance these programmes, the European Commission asked NatWest to help with this, the first 30-year transaction for 2023, in the role of Joint Bookrunner. The mandate followed on from NatWest’s support with two dual tranche EU issuances last year.

Investor demand soared right after books opened for the EU’s €5 billion tap of its 30-year bond due on 4 March 2053. The final order volume exceeded €51 billion, with more than 310 investors participating in the transaction. Fund managers represented the largest investor group accounting for 38% of the transaction, followed by bank treasuries with 26%. The bond attracted broad and diverse interest geographically, with UK investors taking 25% of the transaction, followed by investors in France (17%), Benelux (16%) and Germany (11%).

The bond, which carries a 3% coupon, was the first syndication under the EU’s unified funding approach that the Commission introduced as its main funding method as of January 2023. Under this approach, the Commission – on behalf of the EU – is issuing single branded “EU-Bonds” rather than separately labelled bonds for individual programmes.

NatWest teams deliver for core issuers with One Bank approach

Johannes Hahn, Commissioner for Budget and Administration, commented: “Our first syndicated transaction of 2023 marks a strong and confident start to the new year of EU borrowing. The overwhelming demand for our bond demonstrates the scale and breadth of the investor base that the EU has cultivated for its borrowing activity. We will continue our strong presence in the markets in the coming weeks and months as we proceed with the execution of our issuance plan under our unified funding approach.”

Damien Carde, Managing Director, DCM at NatWest, said: “We’re delighted to have been able to support the EU again, and we’re proud to have been the only bank to act as Joint Lead Manager for this EU 30-year bond as well as the UK DMO’s £6 billion 30-year bond this week. Both issuances were the first real test for duration in the SSA market this year, with both deals marking the longest maturities issued in their respective currencies, year to date; investors’ demand has proven that there is strong appetite for long-dated bonds. Supporting these two core issuers is a prime example of multiple NatWest teams working together as One Bank to deliver the best outcome for our customers.”

Disclaimer

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