Lari Toppinen is one of four people working with funding in MuniFin. His tasks include issuing benchmarks, private placements, hedging and, dealer and investor relations. During his first weeks he has been involved with several transactions, as the team has already reached 30% of this year’s EUR 9–10 billion long-term funding target.
– I would say it has been an exciting start to the year and I quite enjoy the fast-paced environment. Everyone in the team is extremely professional and helpful and I am impressed how fast our team can adapt to new situations and market conditions. I look forward to collaborating more in the coming months, Toppinen says.
– Lari is a team player with good analytical skills, which are key factors in succeeding in this position. He is a great addition to the team and we all look forward to working together, says Antti Kontio, Head of Funding and Sustainability.
Before joining MuniFin, Toppinen gained experience from capital markets at Danske Bank. Currently, he is finishing his master’s degree at Hanken School of Economics.
Toppinen applied to MuniFin as he was intrigued by the company’s reputation as Finland’s most active bond issuer and pioneer status on sustainable finance. Being able to work in a global business environment is also a huge motivational factor for him.
– I always knew I wanted to work in an international role. I completed my bachelor’s degree at Stockholm University and before that I spent six months in Canada studying sustainable investing. I also studied for a year in Spain when I was younger. I hope the situation will soon allow us to travel and meet our dealer banks and investors in person, Toppinen says.
In his free time, he enjoys a variety of sports such as cross-country and downhill skiing, and golf. He likes to spend time with his friends and family and is a big fan of stand-up comedy.
– Ricky Gervais is probably the world’s greatest comedian. His character in The Office is one of my all-time favourites. A fun fact about me is that I enjoy performing and acting myself whenever there is a chance, Toppinen smiles.
Lari Toppinen
Funding Analyst at MuniFin since 10 January 2022
Soon graduating from Hanken School of Economics, majoring in finance
Lives in central Helsinki
Hobbies include cross-country and downhill skiing, and golf
Enjoys stand-up comedy, acting and hanging out with friends and family
Joakim Holmström, Executive Vice President, Capital Markets & Sustainability
There will be a Q&A session after the presentations.
MuniFin’s results webinar
Time: 9 February 2022 2:00 pm (EET)
Registration: Please register for the webinar here.
The event is organized via Microsoft Teams.
A link to join the event will be sent to the registered e-mail. The webinar will be recorded and the recording will be sent to everyone who have registered.
Register here if you are not able to attend but wish to receive the recording.
MuniFin (Municipality Finance Plc) is one of Finland’s largest credit institutions: the Group’s balance sheet totals close to EUR 46 billion. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland.
MuniFin builds a better and more sustainable future with its customers. MuniFin’s customers are Finnish municipalities, municipal federations, municipally controlled entities and non-profit housing organisations. Lending is used for environmentally and socially responsible investment targets such as public transportation, hospitals and healthcare centres, schools and day care centres, and homes for people with special needs.
MuniFin’s customers are domestic but the company operates in a completely global business environment. It is an active Finnish bond issuer in international capital markets and the first Finnish green and social bond issuer. The funding is exclusively guaranteed by the Municipal Guarantee Board.
The Municipality Finance Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd.
The mandate for the transaction was announced on Monday 17 January and books were opened the following morning. Investors showed strong interest and just after ninety minutes MuniFin tightened the pricing.
Finally, the books were closed in excess of EUR 2.05 billion. Final spread was set two basis points lower than the initial guidance. The new bond carries a coupon of 0.250%, and was priced at mid-swaps-5bps, equivalent to a spread of +37.7bps over the DBR 0% due February 2032.
The successful transaction gathered a high-quality and geographically diverse investor base. Banks took the largest share with 35% followed by central banks and official institutions with 31%, asset managers with 23% and insurers and pension funds with the remaining 11%.
Geographically, the largest share went to Benelux region with 32% followed by Germany, Austria and Switzerland with 22%, France with 17%, Asia with 10%, the Nordics with 9%, The Americas 5%, the UK with 4% and other European accounts with 1%.
A new member of the MuniFin Funding and Sustainability Team since 10th January, Lari Toppinen, worked closely on the transaction.
– We are extremely pleased with the outcome and grateful for the trust placed in us by the investors. As a recent reinforcement of the MuniFin team, working on the deal was exciting and rewarding for me as it was one of my first ones here. I look forward to collaborating more with the team and our bookrunners and investors in the coming months.
Toppinen is one of four people working with funding in MuniFin. This includes tasks such as issuing benchmarks, private placements, hedging as well as dealer and investor relations.
This year, MuniFin plans to issue EUR 9-10 billion of new long-term funding. After this benchmark MuniFin has reached almost 30% of the target. Since the start of the year, MuniFin has already issued several NOK denominated bonds, a new Sterling line maturing in June 2025 as well as a handful of private placements.
– A fantastic way for MuniFin to start its euro benchmark funding this year. In a busy market, MuniFin demonstrated its broad investor appeal with a high quality, and geographically diverse final orderbook which closed twice oversubscribed. Congratulations to the MuniFin team! Citi is delighted to have been bookrunner on this successful transaction.
Ebba Wexler, Managing Director, Public Sector DCM, Citi
– MuniFin continues their strong start to 2022 with their first EUR benchmark of the year. Final pricing through Fair value in an extremely competitive market, is a clear testament to the strength of the credit and excellent support that MuniFin enjoys from a well-diversified and high-quality investor community. Danske Bank is delighted to have been part of this successful transaction and proud to support MuniFin in reaching their funding target of EUR 9-10bn for 2022.
Axel Zetterblom, SSA Origination, Danske Bank
– A fantastic outcome for MuniFin’s first Euro benchmark of the 2022 calendar year. The transaction was met with strong investor interest from a diverse range of high-quality accounts, and the two times oversubscribed orderbook highlights the strength of the issuer’s credit quality. Deutsche Bank is delighted to be part of this transaction.
Achim Linsenmaier, Global Head of Public Sector Origination DCM, Deutsche Bank
– Congratulations to MuniFin on a phenomenal transaction to kick off their EUR benchmark funding for 2022. A combination of immensely loyal investors and fantastic execution judgement from the MuniFin team provided an amazing result in what was a busy EUR market.
Laura Quinn, Managing Director, Head of Primary Markets, TD Securities
Further information
Joakim Holmström Executive Vice President, Capital Markets and Sustainability, MuniFin Tel. +358 50 4443 638
Antti Kontio Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
The transaction was announced to the market on Wednesday, January 12. The books were opened with price guidance at UKT 06/25 +39bps area. Investor demand was strong and just an hour after opening the books the spread was tightened. The orderbook was finally closed in excess of GBP 430 million.
This fixed-rate benchmark pays a coupon of 1.125% (annual) and a spread of 38bps over the UKT 0.625% June 2025 reference Gilt. HSBC, NatWest and RBC acted as dealers.
Central banks and official institutions took 38%, followed by banks at 29% and Fund Managers at 25%. In terms of geography, distribution was concentrated in the UK at 54% and Asia in the second place with 33%.
– We have established a solid reputation in the Sterling market, and it is shown by the high-quality orderbook, says Manager Miia Palviainen from MuniFin Funding and Sustainability team.
Transaction details
Issuer:
Municipality Finance Plc (“Munifin”)
Ratings:
Aa1 / AA+ (both Stable) by Moody’s / S&P
Size:
GBP 300,000,000
Coupon:
1.125% annual, Actual/Actual (ICMA), following unadjusted
Pricing Date:
12th January 2022
Payment Date:
19th January 2022
Maturity Date:
19 th June 2025
Benchmark:
UKT 0.625 07/06/2025
Benchmark Spread:
+38bps
Joint Bookrunners:
HSBC, NatWest, RBC
Comments from the Bookrunners
– Congratulations to the MuniFin team on their excellent first GBP syndication of 2022. They achieved a truly exceptional result, attracting large and diverse investor interest which allowed the deal to be priced with a minimal new issue concession. Going forward, this transaction will establish a valuable new reference point for GBP investors. HSBC was proud to be involved in the transaction.
Sabrina Khalfoune, HSBC SSA DCM
– Munifin were quick to capitalise on the strong Sterling backdrop and entered the market with their first syndicated trade of 2022 becoming the first Nordic agency to enter the Sterling market. This reconfirms their commitment to the currency following a record amount of sterling issuance in 2021 (~15% of funding programme). The high quality and oversubscribed book represents the broad credit appeal of the MuniFin name and we are very pleased to have been involved at NatWest.
Kerr Finlayson, Managing Director, NatWest
– A fantastic transaction for MuniFin, reacting swiftly to the favourable market conditions and securing their window to price one of the issuer’s most successful outings in the Sterling market. Attracting MuniFin’s largest orderbook in the currency in almost a decade with participation from a broad range of investors is a real testament to the growing presence MuniFin have established in this market in recent years. A really great outcome and RBC was delighted to have been involved.”
Andrea Jelic, Director, RBC Capital Markets.
Further information
Antti Kontio Head of Funding and Sustainability, MuniFin Tel. +358 500 3700285
On Tuesday 4 January, MuniFin issued a NOK 2.5 billion bond maturing 11 January 2027. The transaction quickly gathered a vast number of investors. On Friday 7 January and Monday 10 January, respectively, MuniFin decided to issue a NOK 1 billion tap and a NOK 1.5 billion tap to the line, which brings the total amount to NOK 5 billion. Danske Bank acted as the dealer for the first transaction as well as the two taps to the line. On Friday 7 January, MuniFin was also active in the NOK market with a NOK 500 million tap of a line originally issued in January 2021 that matures in January 2026. The dealer on this tap was DNB Bank.
With the first trade on Tuesday 4 January, MuniFin was also the first SSA issuer in the NOK market this year.
– The Norwegian market has always played a significant role for us and will remain to do so. Last year a total of 5% of all long-term funding was issued in NOK, which made it the 5th largest currency, says Manager Miia Palviainen from MuniFin’s Funding and Sustainability team.
In 2022, MuniFin forecasts to issue EUR 9-10 billion of long-term funding.
– This was an excellent start for our funding year, says Palviainen.
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.
MuniFin’s fourth and final economic forecast for this year comes out at an exceptional time, says MuniFin’s Chief Economist Timo Vesala. The world economy continues to grow, but short-term risks are on the rise. Omicron, the new coronavirus variant discovered in South Africa, is raising uncertainty to a new level. Because very little is yet known about how dangerous the new variant is, how easily it spreads and how effectively vaccines protect against it, it is difficult to estimate what impact it will have on the economy.
“Our forecast accounts for the recent aggravation of the COVID pandemic, but not for the potential effects of the new variant. If vaccine efficacy proves significantly lower for Omicron than for the other variants, tighter restrictions may have to be imposed. This would also mean that economic recovery will be knocked off track”, explains Vesala.
Another current risk involves China, whose overheated property market is cooling down quickly. Construction investments have played an exceptionally large role in China’s economic growth.
“If China’s economic growth slows down considerably, this will affect the world economy as well”, Vesala assesses.
The business environment is also hampered by the increase of costs. Rising inflation weakens the buying power of consumers and thus also takes its toll on economic activity.
Long-term growth path Finland’s greatest problem
By international comparison, Finland has so far survived the pandemic with only a moderate effect on the economy. Finland’s GDP exceeded the pre-pandemic level already in the second quarter of this year. Employment has also recovered briskly, with the total number of people in employment reaching an all-time high this year.
As economic growth has exceeded expectations, MuniFin revised its growth forecast for this year, raising it from 3.2% to 3.5%. Due to increasing COVID uncertainty and rising costs, however, MuniFin lowered next year’s GDP growth forecast from 3.0% to 2.6%. MuniFin’s growth forecast for 2023 remains at 1.8%, which is slightly above Finland’s long-term growth potential.
According to Vesala, the biggest problem in the Finnish economy is that its long-term growth path is not sufficient to sustain the current welfare state. Finland should gradually start shifting the focus back from COVID damage control to bold economic reform.
“We must create an outlook in which companies have ready access to human capital. Otherwise, our economy will struggle to attract growth investments. To succeed, we must invest in education, research and attracting foreign workers. We should also be in the vanguard of the green transition”, summarises Vesala.
Fed expected to raise interests next year, Europe to follow later
Inflation has accelerated significantly in the autumn. The basic trends in monetary policy are the same in the United States and in Europe, but the central banks are moving at a different pace. The risk of the economy overheating is greater in the US.
“Unless the aggravating pandemic situation causes the short-term outlook to take a significant turn for the worse, the Fed is likely to raise its key interest rates as early as next year”, predicts Vesala.
Inflation uncertainty has also increased considerably in the euro area. Vesala nevertheless believes that the underlying factors, such as the spiking energy prices and disrupted supply chains, are mostly temporary.
“As the worst bottlenecks are being released, their price-increasing effects may be replaced by pressure to decrease prices, returning inflation below the ECB’s target level. The ECB’s new inflation target leaves the central bank more leeway to delay interest rate increases, and I think the ECB will use it.”
Vesala believes that the ECB will reduce its non-standard monetary policy measures in 2022. The time to gradually start normalising interest policy could be in late 2023.
Municipalities have enjoyed generous COVID support measures, which are now coming to an end
Almost all of the key indicators of municipal finances are now looking better than pre-pandemic forecasts expected. The central government has shouldered the main responsibility for mitigating the negative economic impact of the pandemic, ensuring that municipalities will not feel the pandemic pinch.
During COVID, the central government has taken on more debt, however going forward this calls for a stabilisation of the central government debt ratio.
“Generous COVID support measures are inevitably coming to an end”, predicts MuniFin’s CEO Esa Kallio.
The predictability of municipal finances is further complicated by Finland’s ongoing health and social services reform, which will transform the financing structure of municipalities. Municipalities with a strong tax base will lose proportionately more tax revenue than municipalities with a weak tax base. Kallio describes the outcome as unfavourable.
“After the reform, municipalities that can now rely on a growing tax income will become increasingly dependent on central government income transfers. And municipalities with a weakening tax base will increase their reliance on their own tax income. In both cases, a secure source of income is replaced by a more unreliable one.”
The health and social services reform also calls for the evaluation of the long-term prerequisites for growth. The level of education among young people is declining, and Finland has fallen below the OECD average in the percentage of tertiary graduates. Even after the social services reform is implemented, the provision of education will largely be the responsibility of municipalities. In many municipalities, a low birth rate is causing a shortage of pupils and pushing up the unit cost in education.
“With the health and social services reform halving municipalities duties and finances, there is a risk that education will take the hit and suffer the adjustments. Municipalities need more resources, but as of yet, it is unclear where these resources will come from”, Kallio says.
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.
