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Municipality Finance strengthens its capital base by issuing a MEUR 350 capital loan – The company complies with bank regulatory requirements well in advance

Municipality Finance Plc
Stock Exchange Release
September 24, 2015 at 5:30 pm (CET +1)

Municipality Finance strengthens its capital base by issuing a MEUR 350 capital loan – The company complies with bank regulatory requirements well in advance

Municipality Finance Plc has further strengthened its capital base by issuing in the domestic and international markets a capital loan amounting to EUR 350 million. The instrument is an Additional Tier 1 capital loan, included in the Additional Tier 1 capital.

The capital loan is perpetual, and Municipality Finance has the first option to call the loan in 6.5 years after the issue date, in 2022. The coupon rate is 4.5 per cent, which is the lowest interest rate to date in the marketplace for a public AT1 capital loan.

Historical transaction

Municipality Finance is globally the first SSA issuer of a publicly listed AT1 capital loan. In Finland the AT1 transaction itself is first of its kind.

Standard & Poor’s has given the instrument a BBB+ rating, which is the highest rating ever for an AT1 instrument.

Municipality Finance’s issuance received great interest both from Finnish and international investors. The transaction was nearly three times oversubscribed. Domestic and Nordic investors were especially active in the transaction.

Customers benefit from the secured competitiveness

Municipality Finance has for years prepared itself for the capital demands based on increasing banking regulation by improving its profitability. The company intends to continue this strategy also in the future.

Municipality Finance’s capital adequacy is already on an excellent level, but its leverage ratio was 1.9 per cent at the end of June. The leverage ratio requirements based on Basel III regulation will come into force in 2018, and Municipality Finance is prepared for an expected 3 percent leverage ratio requirement. With the issue of an AT1 capital loan, Municipality Finance’s leverage ratio now fulfils this requirement. Municipality Finance clearly complies with all other capital adequacy requirements.

– With the help of this transaction Municipality Finance secures the prerequisites of its operations, its competitiveness and efficient funding in all conditions despite the tightening bank regulation. All this will serve to benefit our customers, says the President and CEO Pekka Averio.

The AT1 capital loan was listed on the Irish Stock Exchange in Dublin. Municipality Finance mandated Barclays, BNP Paribas, Goldman Sachs International and Nordea Markets as joint lead managers of the transaction.


Further information:
Pekka Averio, President and CEO
Tel. +358 500 406 856
Esa Kallio, Executive Vice President, Deputy to the CEO, Capital Markets
Tel. +358 50 3377 953
Marjo Tomminen, CFO, Senior Vice President, Finance
Tel. +358 50 3861 764

Measured by the group’s balance sheet, MuniFin (Municipality Finance Plc) is Finland’s third largest credit institution. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland. MuniFin is an integral part of the Finnish public economy.

MuniFin’s balance sheet totals nearly EUR 34 billion. Funding for the company is primarily obtained through the international capital markets. MuniFin’s funding is guaranteed by the Municipal Guarantee Board.

MuniFin’s mission is to ensure competitive funding for its customers in all market conditions. The company’s customers are Finnish municipalities, municipal federations, municipally controlled companies and non-profit housing cor­porations. A significant portion of lending is used for socially responsible projects such as building hospitals, healthcare centers, schools, day care centers and homes for the elderly.

The Municipality Finance Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd.