The credit rating agency Moody’s believes that the new municipal law, proposed to the Finnish government on November 27th would be credit positive for Municipality Finance (MuniFin).

The new law would require municipalities to report their financial performance and to balance their budgets on a group basis, including the companies they own. The proposed law would require municipalities to close consolidated deficits within four years. 

Moody’s estimates that MuniFin would benefit from the enhanced disclose and deficit closure rules. MuniFin is Finland’s only lender focused on the financing and financial risk management of municipalities and municipally owned corporations.

Moody’s long-term credit rating for MuniFin is Aaa stable.

Published every Monday and Thursday, Moody’s Credit Outlook provides its credit implications of current events. The comment on Finland’s proposed municipal law and its effects on MuniFin were published on December 4th.

The first bond of the year issued in Swiss francs by Municipality Finance (MuniFin) was a great success in the market despite the tight pricing and long-term funding of 10 years. The coupon paid by MuniFin to investors is a record low at 0.75 per cent, which corresponds to mid-swaps -16 basis points.

The note of 150 million Swiss francs or EUR 123.6 million issued on 12 August was fully subscribed, even though it is the tightest priced bond by an international issuer this year, reported SSA Markets, the international news service for security markets. SSA Markets also reported that the deal could have grown beyond 150 million CHF, but MuniFin had capped the maximum size of the deal. Lead manager for the transaction was Credit Suisse.

The investors were mainly pension funds and banks treasuries, which were interested in the high quality of MuniFin’s bond. The yield is low, but the investment is also considered very safe and secure.

Long-term cooperation is bearing fruit

“The Swiss market is important for MuniFin, as it is one of the few markets where we can obtain long-term funding in suitably small lots,” says Joakim Holmström, MuniFin’s Vice President, Head of Funding.

MuniFin issued its first bond in the Swiss capital market in 1997 and the company has been active in the market since 2006. MuniFin even succeeded in issuing a bond in Switzerland a week after the bankruptcy of Lehman Brothers in 2008. Swiss investors have also demonstrated their trust in MuniFin by frequently investing in the company’s pound and dollar-denominated benchmarks.

“The continuous participation in the Swiss market bears fruit. Our latest Swiss franc Benchmark was 10.5 basis points tighter than the corresponding arrangement by the Dutch BNG Bank last week. Such a tight pricing we haven’t seen since 2008,” says Holmström.

Further information:

Joakim Holmström, Vice President
tel. +358 50 4443 638

Municipality Finance (MuniFin) returned on March 10th to the Australian Kangaroo market by issuing a 10 year AUD 125 million (EUR 80 million) public note.

The last Kangaroo trade was issued in 2007 and it matured in 2011. The joint lead managers for the new transaction are Commonwealth Bank of Australia (CBA), Deutsche Bank and Toronto Dominion Bank. The note pays a fixed coupon of 5 %, which translates to 60 basis points over the Australian 10 year swap rate (BBSW). Approximately 50 % of the transaction was sold to domestic Australian investors and 50 % to the international investors.

“Initially our aim was to issue AUD 100 million note, but we decided to increase the size to AUD 125 million due to the strong investor demand”, says Joakim Holmström, Head of Funding at MuniFin. According to him, the Australian Kangaroo market fits well for MuniFin’s funding strategy as the average maturities on that market are long. At the same time MuniFin was once again able to diversify the funding base.

More information:

Joakim Holmström, Head of Funding, tel. +358 9 6803 5685 

Municipality Finance (MuniFin) was selected as the issuer of the year for 2013 in the series of FX-linked products by Capital Market Daily (CMD). In addition, MuniFin was number two in the series of IR-linked products. CMD award winners were selected from among the issuers of medium term note (MTN) products.

The award is based on the opinions of various market parties, league table statistics and personal interviews with market operators. The award is granted annually, and dozens of issuers are nominated as recipient candidates.

Structured bond market is important from the point of view of managing the costs of funding, as the issues to the market are relatively large and their price level is attractive. Receiving the award further improves MuniFin’s name recognition in this market.

“This is a fine achievement for our entire organisation. The FX market requires extremely high professional skill, and there are only a few experts in the world,” says Esa Kallio, Executive Vice President, who leads the Capital Markets department in MuniFin.

“Success is based on seamless and smooth cooperation throughout our funding process with all market parties. The work also requires solid expertise throughout Munifin’s organisation,” continues Kallio.

Global funding

In the past few years, MuniFin has become a desirable partner in the international loan market. The company is a very well-known and trusted operator, even though its total volume is at the low end of medium-sized issuers.

MuniFin gathers funds from global sources. The company’s largest sources of funding are Asia, Europe and America. In the past few years, the Japanese Uridashi market has been among the largest of the regional markets. Through it, Japanese individuals, among others, have been able to invest in the development of Finnish society.

In 2013, MuniFin carried out a total of 244 issues; the largest among them was the benchmark loan of USD 1.75 million implemented in April. This arrangement was the first benchmark issue of MuniFin also directed at investors in the United States.
Various structured loans represent the company’s special expertise. All issues are hedged with regard to both exchange rate changes and interest rate risks so that MuniFin does not carry any risks in funding operations.

“The company operates in a funding market that requires special expertise. Over the years this has become more important and currently MuniFin is the only issuer in Finland with diversified operations in the structured funding. As we are strong in this market, we can ensure the availability of financing for our customers over the long term. The success of our funding operations is also an important factor in the profitability of the company,” says Kallio.

The amount of the company’s annual funding in 2014 is approximately EUR 7 billion, but in 2013 it exceeded EUR 10 billion, due to the company’s own refinancing being higher than normal. This was an exceptional result for everyone involved.

Further information:

Esa Kallio, Executive Vice President, Deputy to the CEO, tel. +358 50 337 7953 +358 50 337 7953
Pekka Averio, President and CEO, tel. +358 500 406 856 +358 500 406 856
Joakim Holmström, Vice President, Head of Funding, +358 50 4443 638

On the 9th of January, 2014 MuniFin (AAA, Aaa) issued the first public note of the year: a 2-year USD 700 million floating rate note. Maturity of the note will be in January, 2016 and the coupon is 3 month USD Libor +6 basis points. The joint lead managers for the note are Citibank, HSBC and Nomura. MuniFin estimates that it will acquire approximately EUR 7 billion of long-term funding in 2014.

“In the beginning our aim was to issue a USD 500 million floating rate note, but the investor demand was so strong that we decided to increase the size to USD 700 million”, says MuniFin’s Head of Funding, Joakim Holmström. “This transaction clearly shows our commitment to the public markets and we are very pleased with the outcome”, Holmström concludes.

More information:

Joakim Holmström, Head of Funding, tel. +358 9 6803 5685 +358 9 6803 5685