Stockholm (NordSIP) – On April 5th, the European Commission issued a €6 billion 20-year green bond under its NextGenerationEU funding programme. The syndication follows its original record-breaking €12 billion, 15-year green bond transaction in October 2021, and its €2.5 billion tap in February 2022. Following this transaction the total long-term financing raised under NextGenerationEU is worth€99.5 billion, of which €20.5 billion in green bonds.
The new green bond carries a coupon of 1.25% and came at a re-offer yield of 1.374% providing a spread of 9 basis points (bps) to mid-swaps, which is equivalent to 74.5bps over the 20-year Bund due in July 2042 and to 1.5bps through the OAT due in May 2040.
“Today’s issuance adds further momentum to the NextGenerationEU green bond programme. By supporting green investments under the Recovery and Resilience Facility, the funds raised will contribute to a more sustainable and more resilient Europe. The strong response to this issuance shows the value that our investors place in our Green Bond programme and the EU’s sustainability credentials,” Commissioner in charge of Budget and Administration, Johannes Hahn said reacting to the deal.
Strong Demand
The final order book was over €78 billion, leaving the bond has been more than 13 times oversubscribed. Sectorally, fund managers purchased 32% of the securities, leaving the rest for Insurance and Pension Funds (26%), Bank Treasuries (26%), Central bank and official institutions (12%), Banks (3%) and Hedge Funds (1%).
Geographically, demand was dominated (65%) by the 9 founding countries of post WWII European integration. Investors domiciled in the Benelux purchased 17% of the green securities, 16% in France, 12% in Germany and 10% in Italy. UK investors purchased another 17% of the bonds, followed by 12% for Nordic countries and 6% to Portugal and Spain. Finally, investors domiciled in Switzerland purchased 4%, leaving 5% to other miscellaneous European countries. Last but not least, Asian investors purchased the remaining 1% of the tickets.
The joint lead managers of this transaction were BofA Securities, Citi, Credit Agricole CIB, Danske Bank and J.P. Morgan
“As a key driver of the green transition and the largest green bond issuer in Europe, the EU is a priority issuer for our business – not least given the strong demand for green bonds we see from especially our Nordic investor base. We are very pleased to continue our collaboration with the EU and honoured to be appointed a central role in the issue of their second NextGenerationEU green bond. We greatly appreciate the support shown from all investors and trust that this important transaction underscores our focus on seamless collaboration across our sales, trading, research and DCM teams,” says Nicolai Platen Rasch Larsen, Global Co-Head of Rates & Credit at Danske Bank.
