Hansabank proves benefit of EU accession
A bond issue by Baltic bank Hansabank has served as a demonstration to corporates and banks alike that EU accession brings cheaper funding.
The bank's issue of ?750 million ($924 million) in floating-rate notes this week priced at 26 basis points over three-month Euribor. Compare this to its only outstanding bond issue, a similarly structured March 2006 note, which priced at 55 basis points over Euribor at the beginning of 2003. Today that note is trading at around 18 basis points over Euribor.
While most corporates in the ten countries that joined the EU in May this year expected their cost of funding to fall with the greater certainty membership would give investors, few expected it to be this dramatic this soon. Hansabank's halving of its cost of capital in 18 months will save them ?10.9 million over the five-year lifetime of its latest bond.
The Estonia-based bank, which is 60% owned by Swedbank, is rated A1 by rating agency Moody's and A, one notch lower, by Fitch Ratings. The deal was priced at the tight end of a 26-29 basis points range after the order book reached ?2 billion, with about ?1.8