New Euro 5 billion EIB Long 5-year EARN highly in demand

• High quality order book built in a day closing at EUR 9 billion
• Highly diverse orderbook made up of 150 investors
• Priced at mid swaps minus 15 bp

The European Investment Bank today priced its third EUR benchmark Euro Area Reference Note (EARN) of 2007. The issue carries an annual coupon of 4.375% and has a final maturity date of 15 April 2013. The bond was priced at a spread of mid-swaps less 15bp, equivalent to 16.7bp over the DBR 4.50% due Jan 2013.

The choice of a long 5-year tenor was a response to market conditions, and also fills a gap in EIB’s existing curve. Furthermore, the April 2013 maturity maintains this new issues’ 5 year benchmark status well into 2008. Recent investor demand for high grade Euro product has been strong, with investors keen to participate in SSA new issues despite continued market volatility.  This coupled with the strong recent secondary market bid for AAA paper in the 5 to 7 year part of the curve meant there was a good issuance window.  Furthermore, significant coupon flows in the Eurozone government markets at the end of October gave investors further rationale to invest in the issue. As an issuer owned by the EU Member States and thereby offering investors diversified sovereign-class exposure, the EIB was well placed to respond to this investor demand.

The transaction was announced on the afternoon of Monday 15th October, with  bookbuilding commencing the following morning with an indicated spread range of -15bps area to mid-swaps (equivalent to DBR 4.50% Jan 13 + 17bp area at the time). The book built quickly and was fully subscribed at EUR 5bn in under four hours of bookbuilding. The high quality orderbook continued to grow through the afternoon allowing the lead managers to accelerate the execution process and shut the European orderbook at 5pm on the same day. The orderbook in Asia was left open overnight to accommodate incremental interest, finally closing at EUR9bn on Wednesday morning. The deal priced inline with guidance at mid-swaps less 15bp – significantly tighter then the -9.0bp achieved in the EIB’s last 5-year EARN due October 2011 which was launched last year.

The book was well diversified across Europe and by investor type, with over 150 investors participating. The orderbook was driven by UK, Asian and Nordic investors, with strong incremental demand seen from France and Switzerland. The central bank participation was relatively high, representing over a third of the order book.

Distribution:

This transaction continues EIB's long-standing commitment to providing sovereign-class liquidity in the EUR market. With the launch of this new April 2013 issue, the total volume of the EARN curve is now EUR 71 billion. This issue is one of the 13 “Eurobenchmarks” (sized at EUR 5bn or above) listed on EuroMTS, and the third EARN issue in 2007.

EIB estimates its funding requirements for 2007 to be up to EUR 55 billion equivalent, an increase from the EUR 50 billion expected at the start of the year. With this EARN, the EIB has issued a total of EUR 50 billion equivalent in 2007. Including this new EARN, EUR issuance accounts for around 35% of the 2007 funding program so far.

Bookrunners for the transaction were HSBC, Nomura, RBS and Société Générale. Senior Co-Leads were Barclays, BNP Paribas, Calyon, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch and UBS. Co-Leads were ABN Amro, Bank of China, Caboto, Citigroup, Credit Suisse, Dresdner, Fortis, Morgan Stanley, Natixis and Unicredit. Selling group members were Banca Akros and ING.

Comments on the transaction:

Barbara Bargagli-Petrucci, Director, Head of Capital Markets Department at the EIB, said: “The results of the issue underline the bellwether appeal of EIB and its EARNs benchmarks, but also EIB’s timely and responsive approach to markets.”

PJ Bye, Director, Head of Public Sector Syndicate, HSBC, said: “EIB displayed impeccable timing by bringing a new medium tenor benchmark in response to extremely strong demand for liquid AAA securities.  The level of oversubscription and the number of investors in the book is a testament to the strength of the EIB credit, the proven liquidity of the EARN programme, and the strong performance potential versus swaps.  Central bank participation was particularly impressive, aided by EIB's ongoing investor relations efforts.  This provided a strong anchor to the book and further encouraged the high level of interest from European real money accounts.”

Jeremy Shaw, Director, Head of High Grade Syndicate at Nomura, said: "The high volume of Central Bank participation from all time-zones as well as real money asset managers in the UK and continental Europe is particularly noteworthy. Whilst maintaining its commitment to providing liquid benchmarks in on-the-run maturities in EURO, EIB has also hit the sweet spot in terms of current investor appetite and has been rewarded with a highly successful transaction in what remain to be challenging market conditions."

Graham Pointer of RBS said: “This was a textbook transaction, warmly received by a broad range of investors.”

Eric Cherpion, Syndicate Société Générale, said: "This trade was tailored to meet current demand in the AAA world. The sponsorship EIB received for this transaction was phenomenal with more than 150 accounts involved across Europe, Asia and North Africa."

Summary terms and conditions for the new bond issue

Background Information:

The European Investment Bank, based in Luxembourg, was set up in 1958 under the Treaty of Rome. Owned by the European Union Member States, the EIB is the EU’s long-term lending institution, financing projects that promote European economic development and integration. Besides supporting projects in the Member States, its main lending priorities include financing investments in future Member States of the EU and EU Partner countries. The EIB operates on a non-profit maximising basis and lends at close to the cost of borrowing. The Bank’s consistent AAA rating is underpinned by firm shareholder support, a strong capital base, exceptional asset quality, conservative risk management and a sound funding strategy. In 2006, EIB raised around EUR 48 billion.