THE WORLD’S THREE best borrowers, according to a survey of more than 1,700 fixed-income investors worldwide, are among the biggest issuers in the market.
Deutsche Finanzagentur, the debt office of the German government, needs to raise almost €350 billion this year. The European Investment Bank expects to reach €80 billion in borrowing in 2010. KfW, the German development bank, will issue in excess of €70 billion for the third consecutive year.
Does the size of these issuers’ funding programmes equate with success? Not necessarily, as the performance of some other large sovereigns, supranationals and agencies in our survey (results of which can be found here) testifies.
But for the issuers that get it right, size does bring its advantages. First, the size of the programme means that the issuer’s senior management needs to have big, experienced funding teams in place that can keep an eye on multiple markets, engage with investors and manage relationships with banks that help them access the markets.
Second, funding programmes allow issuers to provide the liquidity that investors crave in benchmark issues, while at the same time offering tailor-made deals to smaller groups of fund managers in currencies or structures that secure competitive funding rates.
But perhaps the most important factor is this: for issuers with such enormous funding needs, the markets can never be shut, no matter how distorted, volatile, costly or difficult they become. For that reason above all else, the best borrowers have a professionalism that is hard to match.
For their part, these funding officials know the key qualities that they must exhibit: the ability to generate trust among investors; transparent and consistent funding programmes; assurance that they execute as well as they can on deals, even when the markets are against them; and the flexibility to spot opportunities when they arise.