Rare EUR 3 bn 7-year EARN is highly sought after

• First ever EUR EARN benchmark in 7-year maturity, fills gap in EIB curve
• Very rapid bookbuilding and oversubscribed in less that two hours
• Priced at mid swaps -16bps, tight end of guidance, tightest vs. swaps for an EARN

The European Investment Bank today priced its fourth EUR benchmark Euro Area Reference Note (EARN) of 2007, following issues in the 5, 10 and 15-year sectors. The bond was priced at a spread of mid-swaps less 16 bps, the tighter end of guidance (-15/-16bps), and the tightest level for a new EARN versus mid-swaps since the inception of the EARNs programme. This pricing is equivalent to 20.8bps over the DBR 4.25% due July 2014. The issue size of EUR 3bn had been pre-announced and reflected both EIB’s volume requirements and its past practice in certain ‘non-standard’ maturities. The issue carries an annual coupon of 4.25% and has a final maturity date of 15 October 2014.

The choice of a 2014 maturity date fills a gap in EIB’s existing curve and responded to strong investor demand in this maturity.  Due to the volatile market conditions over recent months, investor demand is currently focused on the highest quality assets.  There is also a strong preference for liquid assets.  Eurozone government redemptions and coupon payments in October were over €30 billion higher than government issuance.  Thus, investors are currently cash rich and may have limited opportunities to reinvest in new sovereign class benchmarks before year-end.  EIB has never issued an EARN with a 7-year maturity, Eurozone sovereigns do not currently issue in this maturity and there has been no other supply in 2007.  Thus, investors have had no opportunity to buy top quality current-coupon assets in this maturity for some time.  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 Tuesday 6^th November, with  bookbuilding commencing the following morning (7^th November) with an indicated spread range of mid-swaps minus 15 to 16bps versus mid-swaps (equivalent to DBR 4.25% Jul 14 + 22 to 21bp at the time).  The book built quickly and was fully subscribed at EUR 3bn in under two hours of bookbuilding.  The high quality orderbook continued to grow allowing the lead managers to accelerate the execution process and close the orderbook at 2pm on the same day.  The order book totalled approximately EUR 5.5bn at the time of pricing and there were approximately 100 investors involved in the transaction.  The quality of the order book was very high with strong demand from official institutions across the globe.

Distribution by Geographical Region:

Distribution by Investor Type:

This transaction continues EIB's long-standing commitment to providing sovereign-class liquidity in the EUR market. It will be tradeable on EuroMTS. With the launch of this new October 2014 issue, the total volume of the EARN curve is now EUR 74 billion.

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 close to EUR 54 billion equivalent in 2007. Including this new EARN, EUR issuance accounts for around 38% of the 2007 funding program so far.

Bookrunners for the transaction were BNP Paribas, JPMorgan and UBS Investment Bank.

Co-Leads were ABN Amro, Banca Akros, Barclays Capital, Caboto, Calyon, Citigroup, Credit Suisse, Deutsche Bank, Dresdner, Goldman Sachs, HSBC, ING, Lehman Brothers, Merrill Lynch, Morgan Stanley, Natixis, Nomura, RBS, Société Générale and Unicredit.

Comments on the transaction:

Barbara Bargagli-Petrucci, Director, Head of Capital Markets Department at the EIB, said: “This transaction again demonstrates the strength and innovative character of EIB’s EARNs programme. For investors this offers a rare opportunity in the 7-year sector while also further enhancing the EIB benchmark EUR curve.”

Alexandra Basirov, Head of Sovereign, Supranational & Agencies Debt Capital Markets, BNP Paribas, said: "EIB was able to take advantage of the fact that the 7 year sector is under populated in the SAS universe and provides rarity value. In addition the pick up to EGBs was attractive for investors to get involved, and hence we saw the book build rapidly and were able to price at the tight end of the price guidance (mid-swaps -16bp) within a day of announcing the mandate. This was a remarkable result, especially if you take into consideration they only priced a new 5 year EARN three weeks ago at mid-swaps -15bp."

Olivier Vion, Executive Director, Head of Frequent Borrowers DCM at JPMorgan, said: "With this transaction, EIB successfully completes its 2007 euro benchmark programme. The 7-year point was a gap left open in the EARN curve for new issues and the great reception of the deal shows that investors reward the effort from the issuer to bring liquidity across its curve."

Guy Reid, Executive Director, Head of Frequent Borrower Coverage, UBS Investment Bank, said: “Euro investors have been looking for 7-year assets for some time in order to match their assets and liabilities.  To achieve such rapid oversubscription and broad distribution is a remarkable success and testament to the breadth and depth of EIB’s euro franchise.”