Romania’s last EUR 1.75 billion eurobond issuance of 2018: The types of investors who showed the most interest

Romania’s Public Finance Ministry (MFP) borrowed EUR 1.75 billion from international financial markets on October 4 through a two-series Eurobonds issuance, of which EUR 1.15 billion had a 10-year maturity at an interest rate of 2.87 percent and EUR 600 million with a 20-year maturity and a 4.12 percent interest rate.

“The issuance clearly reflects the positive perception of investors and financial markets of Romania’s medium- and long-term development. The strong demand, as well as the quality of the investors, both confirm Romania’s strengths: its solid macroeconomic foundation, the coherent fiscal discipline and the economic-financial stability. I want to underline the fact that the purpose of the issuance is not to finance current needs, as some have argued, but to strengthen the foreign currency reserve of the State Treasury and minimise the cost of long-term loans,” said minister Eugen Teodorovici.

According to a statement by the MFP, the issuance saw high interest for investors and was oversubscribed by more than 1.6 times, and fund managers showed the highest interest.

Throughout the day, the MFP gradually lowered the credit risk margin and established the final yields. The 10-year maturity got a 3,029 percent yield, while the 20-year issuance obtained a 4.234 percent yield.

The issuance strategy allowed for the gradual reduction of the cost of both series, on the background of a significant oversubscription and a high quality of investors who placed orders.

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For the 10-year maturity, the credit risk margin over the mid-swap reference rate was lowered from 215 to 195 basepoints, while the 20-year credit risk margin was reduced from 280 to 270 basepoints, leading to a issuance premium  of around 10 basepoints for both sets, a remarkable result considering the volatility recorded during the day and the political uncertainty in Italy.

The issuance was brokered by BNP Paribas, Erste Group Bank AG, ING Bank NV and Societe Generale and Unicredit.

“The total offer exceeded EUR 2.8 billion from 265 subscription orders from investors. The investor base was diversified both geographically and in terms of the type of investors who participated, for both series,” the statement by the MFP reads.

For the 10-year series, the geographical distribution was: UK (24 percent), Germany/Austria (20 percent), Central and Eastern Europe (15 percent), Romania (11 percent), Southern Europe (9 percent), Scandinavia (6 percent), France (6 percent), Switzerland (4 percent), Benelux (3 percent), US (1 percent) and other areas (1 percent).

By investor type, fund managers were the predominant category (62 percent), followed by commercial and private banks (24 percent), pension funds and insurance companies (11 percent) and others (3 percent).

The geographical distribution of the 20-year series was: UK (33 percent), Germany/Austria (24 percent), Scandinavia (11 percent), Switzerland (9 percent), CEE (7 percent), Romania (4 percent), France (3 percent), USA (3 percent), Southern Europe (3 percent), Benelux (2 percent) and other areas.

By investor type, fund managers were the predominant category (67 percent), followed by commercial and private banks (17 percent), pension funds and insurance companies (10 percent) and others (4 percent).