Several bankers consider Austrian export credit agency Oesterreichische Kontrollbank (OeKB) to be another example of the success enjoyed by smaller issues in 2002. With funding requirements of between e3 billion and e4 billion, its paper has rarity value and attracts demand in comparatively small benchmark sizes – like NIB.
Its investors seem happy with the liquidity of issues of between $1 billion and $1.5 billion. Particularly in an environment of stagnant equities, numerous corporate defaults and widening swap spreads, the AAA credit, zero risk-weighted and explicitly guaranteed by the Republic of Austria, is well placed to benefit from investors’ desire not to lose any more money. OeKB’s secondary spreads have performed attractively over the past year, standing up well in comparison with more prominent names.
Picking the right moment has never been so important, especially when trying to find a window of opportunity to issue into the congested dollar market. Monika Seitelberger, director in the agency’s international finance team, says: “Timing has become a crucial factor, especially in the midst of the large funding programmes of our peers.”
OeKB’s treasury team plan to stick to its strategy over the year ahead. This will involve one or two global dollar benchmarks. These will be complemented by smaller deals, particularly Swiss franc issues and uridashis. The bank recently issued the latter in dollars, euros and Australian dollars.
Structured MTNs will also be used, although in smaller size than in the case of many issuers. Popular structures recently include range accrual notes, step-up callables, callable capped FRNs and Bermudan reverse floaters. OeKB raised the equivalent of about $100 million in structured deals in 2002 but Seitelberger says it will only issue comparatively big ones, as smaller ones are not economical for a small treasury team.
“A further flattening of the swap curve could force investors to look for higher returns and would therefore cause them to move down the credit curve,” concedes Seitelberger. But she remains confident that there will always be demand for high-grade credit, in spite of any temporary technical considerations.
