EIB launches public debt issuance program

The European Investment Bank (EIB), the European Union's (EU) financing institution, issued the first zł. 200 million ($48.7 million) tranche of its zł. 3 billion ($731 million) zloty-based public debt issuance program Nov. 12.

"Over time the EIB will issue bonds under the program with a variety of tenors and structures on the domestic Polish capital market," said Albert May, an investment banker with Bank Handlowy, the bank handling the transactions.

The program was signed last month by the EIB and Bank Handlowy, as arranger and dealer, and 10 Polish and international banks acting as dealers. It is designed to provide a framework for the EIB to enter the Polish market to finance projects with złoty loans. May said the EIB wanted to issue a larger initial tranche, but the National Bank of Poland's (NBP) recent interest rate cut made this unprofitable. He said the EIB could make another zł. 1 billion ($243 million) move in 2002 or 2003 "depending on market conditions."

May said the issue gives investors an option to move away from government bonds. "We have seen interest from one large investor already, and are in talks with two others," he said. "But this is the first benchmark. This will provide the EIB with the necessary flexibility and cost savings in raising złotys for the benefit of investment in Poland."

EIB Vice President Wolfgang Roth said the issue will follow similar moves elsewhere in the region. "Following the establishment of similar programs for issuance on the markets in Hungary and the Czech Republic, this program will allow us to enter the Polish domestic capital market," Roth said. "We took this initiative to establish access to the Polish domestic investor base, increasing the bank's capacity to provide long-term funding for projects in Poland."

Roth said the EIB's presence will help the market become deeper, and act as an incentive for other issuers to follow the bank's lead. "All market participants would benefit from the resulting diversification in the market," he said.

The program will enable the EIB to raise złotys through various market segments - fixed, floating, zero-coupon or index-linked. Bonds will be issued as public offerings to be listed on the Warsaw Stock Exchange (WSE).

Joe Harper