EIB launches first international Zambian kwacha bond and extends African Euromarket with ZMK 125 billion 2 year issue

• First International Zambian kwacha bond issue, first by foreign issuer
• Synthetic format with payments in USD
• Extends EIB’s track record of contributing to the development of debt markets in African EU Partner countries
• Complements EIB’s activities in Zambia as a lender

The European Investment Bank (EIB), the Bank promoting European objectives, rated Aaa/AAA/AAA (Moody’s/Standard & Poors/Fitch), today launched its first international bond issue denominated in ZMK (Zambian Kwacha). It is the first ZMK issue by a foreign issuer and the first in the international market. It thereby helps draw the attention of international investors to the ZMK market.

The issue is for an amount of ZMK 125 billion (EUR 23m approximately) and carries an annual coupon of 12.25%. The bond is synthetic, with settlements and payments in USD, as determined by the Calculation Agent based on the USD/ZMK exchange rate. The bond has an issue price of 100% and matures 26 February 2010. The transaction was lead managed by Barclays Capital and WestLB.

The bond follows recent initiatives by EIB in African currencies in the international capital markets - in Botswana pula, Egyptian pound, Ghanaian cedi, Mauritian rupee and Namibian dollar. This transaction is a continuation of EIB’s aim to explore funding possibilities in relevant local currencies, notably with a view to supporting development of local currency markets but also marking a step towards potential future lending in local currency. EIB has also issued in South African rand for more than ten years.

The EIB’s issuance activities in African countries complement lending activities in the region where the Bank has been a development partner for some decades. Current cooperation is based on the Cotonou Partnership Agreement of 2000. Under this mandate, the EIB has so far signed loans for a total of EUR 204 million in Zambia for projects covering a wide range of sectors, notably in the mining industry and for small and medium sized enterprises (SMEs).

Comments from EIB and the Lead Managers on the Bond Issue

EIB’s Richard Teichmeister, Head of Funding for Europe (ex-Euro) and Africa, said: “This issue expands EIB’s presence in African Partner country currencies in a way that contributes to the development of the local capital market, by directing international investors’ attention to this African debt market. This further expands the Bank’s repertoire of African funding currencies to seven.”

Raymond Seager, Associate Director of Barclays Capital, said: “Another first for the EIB. They are at the forefront of the capital markets in Africa. This transaction has given the EIB a great opportunity to align their lending activities with their funding, whilst making a meaningful contribution to developing Zambia's capital markets.”

Chris Kenny, Managing Director of WestLB Securities, said “Opening up the capital markets of the region to institutional flows, which are critical to the future development of sub-Sahara Africa, remains our primary objective. Zambia now joins the group of countries that meet the criteria for issuance to the European institutional market, confirming the strong investor interest that been shown for their domestic market debt over the past two years. EIB’s continuing presence in extending its issuance in sub-Saharan Africa is testimony to its vision in this regard and confirmation of its strong developmental track record and positive presence in emerging currency markets.”

Background information on EIB

EIB funding strategy and results in 2007

The Bank’s funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity. Under its 2007 funding programme the Bank raised EUR 54.7bn in 23 different currencies. The Bank’s three core currencies (EUR, GBP, USD) accounted for 84% of funding. The Bank has so far raised around EUR 13 billion under its 2008 programme.

Profile of EIB

The European Investment Bank, based in Luxembourg, was set up under the Treaty of Rome in 1958. The Bank’s consistent AAA rating is underpinned by firm shareholder support, a strong capital base, strong asset quality, conservative risk management and a sound funding strategy.

The Bank’s shareholders are the member states of the European Union. The main task of EIB’s lending activities is to finance projects that promote balanced regional development and economic and social cohesion in an enlarged EU. The Bank’s other lending priorities in the EU are as follows:

• Support for small and medium-sized enterprise (SMEs)
• Implementation of the Innovation 2010 Initiative (i2i): this program is designed to support the development of a knowledge-based, innovation driven economy
• Development of Trans European Networks, in the fields of energy, telecommunications and transport
• Environmental protection and improvement
• Sustainable, competitive and secure energy.

Outside the EU the EIB supports the EU development and cooperation policies with Partner Countries, in particular through the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) and the Cotonou Agreement focusing on African, Caribbean and Pacific countries.

The majority of the Bank’s outstanding loans have been for infrastructure projects, with the largest share taken by transport projects. Other key areas of infrastructure lending have been the energy, water and telecommunications sectors. Apart from infrastructure, other areas of lending have included loans, via financial intermediaries, as well as loans to industry, healthcare, education, services and agriculture.