10.5.2011
Municipality Finance issues a successful inaugural Benchmark transaction
On Monday 9th May 2011, Municipality Finance Plc, the Finnish municipality funding agency, rated AAA/Aaa, successfully launched and priced its inaugural USD 1.5 billion benchmark issue.
The transaction has a final maturity of 16th May 2016, pays an annual coupon of 2.375% and has an issue price of 99.970%. The issue was priced at 32 bps above mid-swaps, at the very low end of the initial guidance of swaps plus low to mid 30s. This equates to a spread of 52.25bps over the current US Treasury 2.000% due April 2016.
This is Municipality Finance’s inaugural USD Benchmark issue and followed extensive investor marketing and a Roadshow during which Municipality Finance met several key USD benchmark investors worldwide.
“This is our debut issue and we wanted to go in front of investors to present our story and listen to the feedback. Municipality Finance is a frequent issuer in the MTN market with a diversified investors base and entering the dollar benchmark market is strategically important for us to further diversify our funding”, says Esa Kallio, Deputy CEO of Municipality Finance.
The benchmark transaction was announced on Thursday afternoon and was met with immediate interest among investors. The 5 year maturity was selected in response to investor demand uncovered during Friday and confirmed to the market.
The books were opened on Monday morning with a guidance of low to mid 30s over swaps and pricing no later than Tuesday. The orderbook grew rapidly driven by orders from central banks and official institutions and reached USD 1.0bn in 1 hour.
“The initial plan was to price on Tuesday, allowing all investors to have sufficient time to work with the name given that Municipality Finance is a debut issuer in the USD Benchmark market. Though due to the very strong momentum there was a need to accelerate the timing for full execution on Monday, at the tight end of the guidance while also increasing the amount to USD 1.5bn from the original USD 1.0bn target,” says Povl Bak-Jensen, Head of Fixed Income Syndicate at Nordea.
The orderbook closed at around USD 1.7bn with over 40 investors participating. The distribution can be broadly summarized as follows.
· Central Banks & Official Institutions 52 %
· Banks & Private Banks 26 %
· Pension and Insurance 13 %
· Fund Managers 9 %
By geography:
· Asia 34 %
· Europe exc. Nordics 28 %
· Nordics 19 %
· Americas 11 %
· Middle East & Africa 8 %
“We are extremely pleased with the outcome. We managed to attract a highest quality and well balanced orderbook and upsize from the original plan of a USD 1.0bn benchmark. We will come back to the benchmark market and believe that this transaction will constitute a good reference point for future issuance and establishes Municipality Finance as a benchmark issuer”, says Joakim Holmström, Head of Funding at Municipality Finance.
Credit Suisse, HSBC, J.P.Morgan and Nordea Markets acted as joint lead managers.
More information:
Municipality Finance
Esa Kallio, Executive Vice President, Deputy to CEO, tel. + 358 9 6803 6231, esa.kallio@munifin.fi
Joakim Holmström, Vice President, Head of Funding, tel +358 9 6803 5674, joakim.holmstrom@munifin.fi
Joint Lead Contacts:
Ed Mizuhara, Credit Suisse, +44 207 888 1995
PJ Bye, HSBC, +44 207 991 5863
Richard Gustard J.P.Morgan, +44 207 779 3130
Povl Bak-Jensen, Nordea Markets, +45 3333 1921
