European Union issues $7 billion bond to Portugal

[News_Editor]

European Union issues $7 billion bond to Portugal

2011-09-16 10:17:56 GMT+7 (ICT)

BRUSSELS (BNO NEWS) -- The European Union (EU) on Thursday announced that it has issued a €5 billion ($7 billion) bond with 10 years maturity to Portugal.

The operation was launched by the European Commission, on behalf of the EU, under the European Financial Stabilization Mechanism (EFSM), and jointly with the International Monetary Fund (IMF). The funds raised will finance a further loan to Portugal, which receives lending as part of the financial assistance package, the EU said.

Under the EFSM, the new bond, which matures on September 21, 2021, marks the EU's second with a 10 years maturity. In May and June, two previous loan disbursements to Portugal for a total of €6.5 billion ($9 billion). Complementary loan disbursements have also been made by the European Financial Stability Facility (EFSF) and the IMF.

In addition, the €5 billion ($7 billion) benchmark pays a coupon of 2.75 percent and was priced at mid-swaps +20 basis points. Disbursements to Portugal will be made next Wednesday, the settlement date of the bond.

Books, including about 100 accounts, were closed within less than three hours, having subscriptions of about €7 billion ($9.7 billion), showing solid investor interest. Successful placement also shows the confidence of markets in euro zone.

In the coming weeks, the EU, through the EFSM, plans to launch further bonds for €5 billion ($7 billion), in one or two transactions with maturities from 5 to 15 years. For the remainder of the year, the EU intends to issue one further benchmark bond. The combined upcoming funding this year will be used for loans to Ireland and Portugal.

On May 17, the financial assistance package for Portugal was agreed by the Eurogroup and the EU's Council of Economics and Finance Ministers.

The financial package covers Portugal's financing needs of up to €78 billion ($108.3 billion). The European Union (EU), through the use of the EFSM and the EFSF, both provide loans up to €26 billion ($36.1 billion) each, to be disbursed over 3 years. Further support is been made available through the IMF with loans of up to €26 billion ($36.1 billion).

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