Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Basics — 40
a variety of currencies, as figure 2 shows. European public sector
bond issuers typically seek to optimize their financing costs and
diversify their investor base. One clear trend in the currency distribution
in figure 2 is the increase in “other” currencies. The issuer in
the sector with the largest number of bonds outstanding by value
is the European Investment Bank, EIB, with EUR 245 billion, followed
by Kreditanstalt für Wiederaufbau, KfW, with EUR 234 billion.
In 2005 the EIB raised EUR 49.8 billion via 330 transactions in 15
different currencies, with 88% in the bank’s three core currencies:
euro (EUR), pound sterling (GBP) and US dollar (USD). The EIB’s
stated objective is to issue 85% to 90% of its debt in its core currencies.
The remaining 12% of EIB’s 2005 issuance involved 12
different currencies. The EIB’s 2006 funding program is expected
to be in the range of EUR 50 to 55 billion, with a similar volume of
issuance from KfW. For comparison, the Swiss government is expected
to issue CHF 6.5 billion (EUR 4.2 billion) of debt in 2006.
The EIB delivers benchmark liquidity across its three core currencies
and is the sole issuer to offer such comprehensive yield curves
across EUR, GBP and USD. In 2005 the EIB raised EUR 19.3 billion
in the EUR market and is the only borrower that complements sovereign
issuers with benchmark issues in a global format with a size
of up to EUR 5 billion and outstanding maturities ranging from 3
years to 30 years. It has an aggregate amount of EUR 62 billion of
bonds outstanding in EUR. In the non-benchmark EUR segment
EIB saw a dramatic increase in demand from European investors
for yield-enhancing interest-rate-structured transactions in 2005
and raised EUR 7.6 billion, up over 100% versus 2004, and this
trend is likely to continue. In 2005 the EIB raised USD 18.3 billion in
USD debt capital markets, making it the largest non-US issuer in
USD in the international markets. In 2005 the EIB issued five USD
global benchmark issues, including three USD 3 billion issues, as
well as two Eurodollar bonds totalling USD 2.25 billion. EIB’s structured
US dollar transactions in 2005 amounted to USD 2.9 billion.
The EIB is the leading frequent issuer in the GBP market, after the
UK government (Gilts), raising GBP 6.9 billion (EUR 10.0 billion) in
2005. The EIB’s bonds are the main alternative to UK Gilts and act
as the benchmark for the non-Gilt market, with around GBP 42 billion
of bonds outstanding. In 2005 the EIB brought 11 benchmark
issues to the sterling market, demonstrating its consistent approach
to maintaining a GBP yield curve, which includes a 50-year
maturity issue. Figure 3 shows the currency breakdown of EIB’s
outstanding debt by major currencies.
Trend towards currency diversification
The increasing trend to issue bonds in non-core currencies, as
shown in figure 2, can be broadly segmented into five groups: 1) the
Japanese yen (JPY) is the single most important currency and is
particularly used by issuers like Eksportfinans (EXPT) and KfW for
private placement in Japan; 2) the currencies of new EU member
states and accession countries, which includes the Hungarian for-
Table 1
Some leading European public sector bond issuers compared to the Swiss government
Major public sector issuers, ranked by amount of debt outstanding, with the Swiss Federal Government as a comparison.
Source: Credit Suisse, Bloomberg
Name of issuer Country/region BB ticker Scope Bonds outstanding (EUR bn) Credit ratings
S&P Moody’s Fitch
European Investment Bank European Union EIB Development bank 244.8 AAA Aaa AAA
Kreditanstalt für Wiederaufbau Germany KFW Development bank 234.3 AAA Aaa AAA
NRW.BANK Germany NRWBK Development bank 86.1 AA- Aa2 AAA
Swiss Government Switzerland SWISS Government 72.3 AAA Aaa AAA
Bank Nederlandse Gemeenten Netherlands BNG Public sector bank 70.7 AAA Aaa AAA
Caisse d’amort. de la dette sociale France CADES Government agency 64.5 AAA Aaa AAA
Landwirtschaftliche Rentenbank Germany RENTEN Development bank 60.1 AAA Aaa AAA
Svensk Exportkredit AB Sweden SEK Export finance 23.0 AA+ Aa1 NR
Nederlandse Waterschapsbank Netherlands NEDWBK Public sector bank 25.0 AAA Aaa AAA
Instituto Credito Oficial Spain ICO Development bank 23.2 AAA Aaa AAA
L-Bank Foerderbank Germany LBANK Development bank 21.1 AA+ Aaa AAA
Réseau Ferré de France France RESFER Railway infrastructure 19.6 AAA Aaa AAA
Eksportfinans A/S Norway EXPT Export finance 17.8 AA+ Aaa AAA
Österreichische Kontrollbank Austria OKB Export finance 15.7 AAA Aaa NR
German Postal Pensions Germany GPPS Special purpose entity 15.5 AAA Aaa AAA
SNCF France SNCF Railway operator 15.0 AAA Aaa AAA
Nordic Investment Bank Scandinavia NIB Development bank 13.6 AAA Aaa NR
Council of Europe 38 European countries COE Development bank 13.3 AAA Aaa AAA
Network Rail Infrastructure Great Britain UKRAIL Railway infrastructure 13.2 AAA Aaa AAA
Kommuninvest Sweden KOMINS Public sector bank 6.0 AAA Aaa NR
ASFiNAG Austria ASFING Road infrastructure 5.7 AAA Aaa AAA