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A triumph for transparency Spanish Treasury reports shift in investor attitudes |
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| Best borrowers 2011: Results index |
You didn’t have to be one of Europe’s more pressured sovereign borrowers to have suffered from the whiplash of contagion at the height of the European debt crisis. Triple-A supranationals were also adversely affected. “Three or four years ago, investors were happy to buy credits like EIB on the strength of the triple-A rating alone,” says Eila Kreivi, head of capital markets department at the European Investment Bank’s Luxembourg headquarters. “In times of crisis, when headlines and economic change blur the picture, investors require more feedback on the credit story to gain reassurance on fundamentals. Last year, for example, rumours were flying around about EIB being the bailout entity in the eurozone.” Mercifully, those rumours have been squashed. But as Kreivi says, changes in the market environment in 2010 had a material impact on EIB’s funding tactics. “In the second quarter of last year we reduced our issuance of large benchmarks because volatility and execution risk was heightened,” she says. “Instead investors and EIB were better served by targeted alternatives that we deployed, such as issues targeted at cooperative bank investors in euros, MTN issues in dollars and FRNs in sterling.”
This year, says Kreivi, it has been more a case of business as usual for EIB in the international capital market. As a recent example, she points to the smooth execution of the $3 billion, five-year global benchmark printed by the EIB in May, which was its sixth dollar benchmark of the year. “It was notable that we were able to issue a successful US dollar benchmark that was not affected in terms of pricing or execution at a time when concerns over certain European sovereigns were resurfacing,” she says. “This time last year that would have been much more challenging.”
The challenges associated with distributing benchmarks at the pinnacle of the European debt crisis forced a strategic rethink, even among the best-rated SSA borrowers. One explanation for EIB’s continued high ranking in this year’s survey is the intensified emphasis the bank has put on investor relations in an environment in which the market no longer believes there is any such thing as a risk-free investment. Peter Munro, head of investor relations, says that EIB has probably attended at least 30% more one-on-one meetings and conferences over the past year than it did pre-crisis. “Investors have appreciated more regular and timely briefings, as well as transparency in response to questions,” he says.
That effort has certainly supported EIB’s marketing in recent months. Perhaps more important, it has had the effect of adding diversification and granularity to its investor base. “The average number of investors per unit of our funding has increased in the past couple of years,” Kreivi says. “So our intensified investor-relations work has done more than reassure existing investors, it has also allowed us to gain new investors.”
