Based on the latest annual review of recognised agencies in the Eurosystem collateral framework, MuniFin complies with the quantitative criteria of the European Central Bank as of 10 December 2021. In practice, this has decreased the haircuts applicable to bonds issued by MuniFin when they are used as collateral for Eurosystem credit operations. The decrease in haircuts amounts to approximately 5-12 percentage points, depending on the remaining maturity and the coupon structure (fixed, floating, zero coupon) of the bond. The change in haircuts became effective on Monday 13 December 2021.
For further information on the current valuation haircut levels applied to eligible marketable assets, please refer to the ECB Guideline ECB/2015/35 (as amended). MuniFin’s Eurosystem eligible bonds are allocated in Haircut Category II. Previously MuniFin’s bonds were allocated in Category IV.
MuniFin will continue to focus on issuing strategic benchmark bonds, which at MuniFin means EUR and USD denominated benchmarks. The plan is to issue approximately 2/3 of the funding through these EUR and USD strategic benchmark bonds and the rest 1/3 through tactical bonds, which at MuniFin equals other public markets (e.g. GBP, NOK, AUD), private placements and structured retail bonds in Japan. MuniFin plans to issue a public SOFR line in 2022, subject to market conditions.
MuniFin also aims to continue its commitment to issue in green and social bonds like in past years. We forecast to issue one green and one social bond in 2022. The sizes of the green and social bond issues will depend on the underlying asset development of the customer financing portfolio.
In 2021, MuniFin has thus far issued EUR 9.4 billion of new long-term funding. Approximately 50% was issued in strategic benchmark bond format in EUR and USD. This included two new 7- and 10-year EUR benchmarks and two new long 5-year USD benchmarks. MuniFin also tapped its EUR social bond maturing in 2035 by 500 million and issued a new green bond in GBP, MuniFin’s first green bond in the Sterling market.
The top 5 issuance currencies in 2021 are thus far EUR (37%), USD (26%), GBP (15%), JPY (14%) and NOK (5%). These currencies account for 97% of the new funding issued in 2021.
Further information
Antti Kontio Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
Structured notes are an important tool for MuniFin to diversify funding and cater the preferences of a broader investor base. Despite the structured note market shrinking considerably each year, MuniFin has been able to keep a strong presence.
– We have held a commitment to the market. In addition to our credit rating, we believe our success is due to our ability to adapt to new market trends. We strive to have an active dialogue with our dealer banks and investors, says Senior Manager Karoliina Kajova from MuniFin’s Funding and Sustainability team.
In 2021, the structured notes issuance volume has reached EUR 1,9 billion, which is 20% of total new funding.
– The percentage of structured funding has remained stable during the past few years. We continue to invest in risk modelling, which allows us to keep an active presence in the market also in the future, Kajova says.
MuniFin won the award also last year and three times in a row in 2016, 2017 and 2018.
CMD Portal is an independent collaborative market data network for bond and money market professionals. They provide access to a robust dataset, flexible data analysis tools and research on fixed income products for institutional asset managers, issuers and intermediaries.
The platform is an electronic issuance and communication platform for the global debt capital markets, which enables communication between the issuer and dealers. Documentation and even contract signing are handled through the platform.
– Our pilot transaction went even smoother than expected, says Manager Miia Palviainen from MuniFin’s Funding and Sustainability team.
The pilot 1-year fixed rate bond in question was RON denominated and Citigroup Global Markets Europe acted as the dealer.
– Our intention was to try out the new platform and see how it could improve our internal processes that are quite labour intensive. The platform itself is well designed and intuitive to use. Next, we will explore the API integration and remain optimistic about using the platform in future trades as well, says Palviainen.
Since Origin started developing their platform in 2015, it has gained 95 issuers and nearly 1000 active users.
– Currently, the platform is mostly for plain vanilla and callable fixed rate transactions, but we hope to see more possibilities in the future. Overall, we are happy with the test trade, Palviainen says.
Taking advantage of the constructive market tone, MuniFin announced the transaction on Tuesday 26 October at 9:10 London time. The books opened with price guidance at UKT 09/24 +30bps area. The size was fixed from the outset at GBP 250 million. The orderbook grew steadily and was finally closed in excess of GBP 300 million at 12:15.
Central banks and official institutions took 44% of the orderbook, with Asset Managers as a close second with 42.9% participation. Geographically, European investors took 54.2%, excluding the Nordics. Asia Pacific took 34% and Africa and the Middle East 10%.
– We are excited to have issued our inaugural green bond in the GBP market and to have been able to offer the green bond product to the Sterling market. It was great to add a fourth currency to our green bond offering and to further diversify our green bond investor base. We are humbled by the vote of confidence from our investors and we couldn’t be happier, says Karoliina Kajova, Senior Manager at Funding and Sustainability at MuniFin.
MuniFin has previously issued EUR and USD green bonds in the public market and one private placement in AUD. The first green bond was issued in 2016. With this transaction MuniFin is close to completing its funding target for the year.
0.875% annual, Actual/Actual (ICMA), following unadjusted
Pricing Date:
26th October 2021
Payment Date:
02nd November 2021
Maturity Date:
16th December 2024
Benchmark:
UKT 2 ¾ 09/07/24
Benchmark Spread:
+30bps
Joint Bookrunners:
BofA Securities, Nomura, TD Securities
Comments from the bookrunners
“Huge congratulations to the Municipality Finance team for navigating the volatile backdrop and printing a hugely successful, second GBP transaction of 2021. Excellent to see the issuer benefiting from the growing demand for ESG assets in GBP and adding a fourth currency to their Green bond offerings. The orderbook is testament to the strong following MuniFin has gathered amongst the UK investor base, as well as the broader global central bank community. “
Adrien de Naurois, Managing Director, Head of DCM SSA & EMEA IG Syndicate, BofA Securities
“Nomura was delighted to support Municipality Finance’s inaugural Green outing in the Sterling market – a resounding success, broadening MuniFins’s ESG investor universe and reinforcing the sustainability commitment of the organisation.”
Mark Yeomans, Managing Director, SSA Debt Capital Markets, Nomura
“Congratulations to the MuniFin team on a fantastic inaugural GBP Green transaction. There was notable participation from dedicated green investors in this trade; a clear vote of confidence from the market in MuniFin’s credentials in the ESG space. This transaction has added a fourth currency to MuniFin’s green offerings and helps further expand their green investor base.”
Laura Quinn, Managing Director, Head of Primary Markets, TD Securities, Dublin
Further information
Joakim Holmström
Executive Vice President, Capital Markets and Sustainability, MuniFin
+358 50 4443 638
Antti Kontio
Head of Funding and Sustainability, MuniFin
+358 50 3700 285
Karoliina Kajova
Senior Manager, Funding and Sustainability, MuniFin
The mandate for the EUR 500 million Social bond tap was announced 12:00 CET on Monday 4 October 2021 and the books opened the following morning with a spread guidance of mid-swaps +1 area. Exceptionally strong investor demand allowed MuniFin to tighten the spread guidance quickly to MS-1 bps area. Despite the tightening of 2 bps the orderbook grew to EUR 1.8 billion. The final spead was set to MS-2. The original bond offers a 0,050% coupon. The transaction was jointly led by DZ BANK, NatWest Markets N.V., SEB and Société Générale.
The bonds were distributed to a high degree of quality investors across Europe, with 75% placed with dedicated ESG accounts. A total of 43 investors, all European, finally participated in the transaction. Asset managers took the bulk with 43% allocation, followed by a 31% allocation to central banks and 24% to bank treasuries.
The record-high demand among ESG investors fortifies MuniFin’s excellent reputation as a sustainable bond issuer.
“We are extremely pleased with the outcome. The exceptionally high interest among ESG investors and a meaningful greenium, or should we say socium, of around 2 basis points shows that sustainability really pays off”, says Antti Kontio, Head of Funding and Sustainability at MuniFin.
MuniFin’s social finance promotes investments that produce widespread social benefits and serve the needs of their users in an exemplary way. MuniFin’s social finance projects promote equality, communality, safety, welfare, or regional vitality.
DZ BANK, NatWest Markets N.V., SEB, Société Générale
Comments from the bookrunners
“DZ BANK as an institution that firmly roots in the cooperative and sustainable financial sector is proud to have been chosen to support MuniFin in this highly successful bond issue as a bookrunner.
While we expected strong participation from Germany already ahead of the transaction, it is even greater so see how well known MuniFin is by the German investor base and how much it likes the MuniFin credit. MuniFin also met the sweet spot of demand with their 15 year tenor.
The social format of the bond and Munifin´s social commitment in the eligible categories social housing, welfare and education was another driver for the strong outcome and tight pricing of the transaction.”
Kai Poerschke, Head of SSA Origination at DZ BANK
“A great outcome for the Munifin team who remain at the forefront of ESG in the primary markets. By offering investors an opportunity to be involved in a more liquid issuance they have once again been rewarded with strong demand from a loyal investor base. Books over 3 times subscribed with a sizeable ‘greenium’ clearly show this. 75% take up from ESG accounts is another impressive statistic and represents the largest ESG allocation MuniFin have seen.”
Kerr Finlayson, Head of FBG Syndicate at NatWest Markets
“We congratulate MuniFin on the fantastic outcome of their second venture into the Social market. The transaction was met with the solid investor support that the MuniFin name always delivers, with a multiple times oversubscribed book, and pricing 1 bp inside fair value. The successful outcome today highlights investors’ commitment to MuniFin and the important work they do to improve social well-being in Finland.”
Rebekah Logan Bray, Senior Originator, SSA Origination at SEB
“MuniFin’s best in class social bond framework and investor reporting have once again been endorsed with this remarkable success. By adding liquidity to its 2035 issue, MuniFin has achieved a pricing through secondary with a transaction over 3 times oversubscribed.”
Olivier Vion, Head of SSA Primary Markets at Société Générale
Further information
Antti Kontio, Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
Joakim Holmström, Executive Vice President, Capital Markets and Sustainability, MuniFin Tel. +358 50 4443 638
The mandate for this USD 1 billion transaction was announced on Monday 25 August at 14:00 CET with IPTs of MS+4bps area. When the books opened the following morning MuniFin tightened the pricing by 1bp to MS+3bps area due to excess and high-quality demand of USD 2 billion. The orderbook quickly grew to a total of USD 3.4 billion and the benchmark was finally priced at MS+2bps, making it the largest and tightest USD transaction to date.
“We were able to react swiftly to the favorable market conditions, which was a key-factor in making this transaction a huge success”, says Antti Kontio, Head of Funding and Sustainability at MuniFin.
The transaction gathered over 80 investors of the highest quality with Central Banks and official institutions taking 32% and bank treasuries taking 55% of the final allocations. Geographically, European investors took the bulk with 53% allocations, supplemented by Americas (20%), Asia (16%), Nordics (10%) and Africa and Middle East (1%).
With this trade, MuniFin has raised 75 percent of the EUR 10-11 billion funding target for 2021.
Issuer:
Municipality Finance Plc (“MuniFin”)
Ratings:
Aa1 / AA+ (both Stable) by Moody’s / S&P
Format:
RegS/144A
Coupon:
% Fixed S/A, 30/360
Size:
USD 1 billion
Pricing Date:
25th August 2021
Payment Date:
2nd September 2021 (T+5)
Maturity Date:
2nd September 2026
Coupon:
0.875%, semi-annual
Reoffer Spread:
MS + 2 bps | CT5 + 11.31 bps
Joint Bookrunners
Citi / J.P. Morgan / Nomura / RBC Capital Markets
Comments from the Bookrunners
“Congratulations to the MuniFin team on a very successful outcome for their second USD benchmark of the year. MuniFin’s decision to move quickly against a strong primary market backdrop was rewarded with the tightest spread versus mid-swaps and USTs that they have achieved for a 5-year benchmark, as well as the largest ever orderbook for a MuniFin USD benchmark. Citi was delighted to be involved in this record-breaking transaction.”
Ebba Wexler, Managing Director, SSA Debt Capital Markets, Citi
“Congratulations to MuniFin on an incredible post-summer return to the USD benchmark market. The issuer’s largest USD orderbook to date, record spreads both versus Mid-Swaps and Treasuries, as well as pricing with minimal new issue concession: All a reflection of MuniFin’s credit quality and high standing amongst global investors.”
Angelica-Maria Strolz, Executive Director, SSA Debt Capital Markets, J. P. Morgan
“An incredibly well-timed and successful transaction for MuniFin, taking advantage of the early post-summer window to secure their 2nd US$ benchmark of 2021 whilst simultaneously achieving historically tight spreads. Investors have been clearly anticipating supply and the rapid oversubscription of the book, with over 80 accounts participating, is a clear demonstration of the appeal of the MuniFin credit to the global investor community and a recognition of the MuniFin team’s strategic focus on investor engagement. It has been huge pleasure for Nomura to work with MuniFin on this trade.”
Mark Yeomans, Managing Director, SSA Debt Capital Markets, Nomura
“A fantastic transaction for MuniFin, reacting swiftly to the favourable market conditions to price their tightest ever 5-year USD benchmark. Attracting demand in excess of $3.4bn with pricing at minimal concessions to the issuer’s outstanding USD curve is a real testament to the tireless efforts of the MuniFin team in engaging with the global investor base. A really great outcome and RBC was delighted to have been involved.”
Andrea Jelic, Director at RBC Capital Markets
Further information
Antti Kontio, Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
Joakim Holmström, Executive Vice President, Capital Markets and Sustainability, MuniFin Tel. +358 50 4443 638
“During the last year we have been building our operational capabilities for both SOFR- and SONIA-linked funding products. Now when we are operationally ready, it was very nice to get this trade done and enter into a completely new market. We see that these new risk-free rates will be the new market standard in the future and they will be in an important role in our funding strategy”, says Joakim Holmström, EVP Capital Markets and Sustainability at MuniFin.
The mandate for the EUR 500 million 7-year Euro benchmark was released at 09:00 CET. The investor demand started out strong and the order book grew steadily reaching a total of EUR 907 million.
The successful benchmark was priced at 14:50 CET with a re-offer spread of MS -6bps, yielding -0.224% with re-offer price of 101.582%. This is equivalent to a spread of 30.3bps over the DBR 0.5% due 15 February 2028.
– This is our second Euro benchmark of the year. We were very pleased to see strong investor demand again together with a minimal new issue premium. In the future we are planning to use this line for taps, says Antti Kontio, Head of Funding and Sustainability at MuniFin.
A total of 33 investors participated in the transaction with 86% allocation to European and 14% to Asian investors. Central banks took the largest 41% allocation and banks were a close second with 38% allocation. The final 21% allocation went to asset managers.
In 2021 MuniFin forecasts to issue EUR 10-11 billion of long-term funding. After this EUR 500 million benchmark MuniFin has reached 43% of the total target.
Issuer:
Municipality Finance Plc (“MuniFin”)
Rating:
Aa1 / AA+ (Moody’s/S&P – both stable)
Issuer Size:
EUR 0,5bn
Payment Date:
21st April 2021 (T+5)
Maturity Date:
21st April 2028
Coupon:
0.00%
Re-offer Price:
101.5820%
Re-offer Yield:
-0.224 %
Re-offer vs. Mid Swaps:
-6bps
Re-offer vs. Benchmark:
DBR 0.50% due 15 February 2028 +30.3bp
Lead Managers:
Danske/LBBW/Morgan Stanley/Nordea
Further information
Antti Kontio, Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
