Today the Republic of Iceland has issued bonds in the amount of EUR 500 million, the equivalent of ISK 61.5 bn.
The bonds bear 0.5% fixed interest and a five-year maturity, offering investors a yield of 0.56%. Investors demand was very strong, with over EUR 2 billion of orders within 90 minutes of announcement. Demand continued to grow from the international investor community and at the end of the offering process the orderbook captured EUR 3.9 bn, some eight times the issued amount. The investor group comprises mainly central banks and other institutional investors, primarily from Europe. Joint lead managers for the issue were Citi, Barclays, Deutsche Bank, and Nomura.
Alongside the new issue, the Treasury made a buyback offer for a 6-year bond originally issued in 2014 with an original amount of EUR 750 m. Bond owners holding EUR 397.6 bn nominal value (ISK 49 bn) accepted the offer, and interested parties were granted priority allocations in the new bond. Total Treasury debt increases by ISK approximately 12.5 bn as a result of these transactions.
“This issue is a milestone for the Treasury, which has never borrowed funds on more favourable terms,” said Minister of Finance Bjarni Benediktsson. “Investors’ response was well in excess of expectations, with demand outstripping supply by a factor of eight. Both participation in the buyback and demand for the new bond are indications of investor confidence and a recognition of the strides Iceland has made in public finance and economic policy. Fitch Ratings’ upgrade of the sovereign last week was doubtless a contributing factor as well. These transactions are an element in implementing Iceland’s Medium-Term Debt Management Strategy, the objectives of which are to ensure access to foreign long-term credit markets and to a diversified investor group. They also set an important benchmark for favourable terms for others seeking access to foreign credit markets.”