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Issuance of the first European social bonds for €17bn



           


EU. In the framework of the SURE (Support to mitigate unemployment risks in emergency) instrument created by the European Union to protect jobs and employees against the consequences of Covid-19, the European Commission has issued its first social bonds for an amount of €17 billion.
The first €10 billion bond is due to be redeemed in October 2030, and the second €7 billion in 2040.

This is the largest subscription ever recorded, according to the European Commission in a press release.
Demand exceeded capacity by thirteen times (€145bn for the 10-year bond and €88bn for the 20-year bond). Following a call for proposals launched on 9 October 2020, a mandate was given on 19 October 2020 to a banking syndicate composed of the five selected banks: Barclays, BNP Paribas, Deutsche Bank, Nomura and UniCredit. "The majority of the allocations were allocated to accounts in Germany, France, Benelux and the United Kingdom," the press release said. The subscription books were opened on Tuesday 20 October 2020 at 8:55 a.m. and closed at 10:00 a.m. (Central European Time - CET).

100 bn maximum, of which €30 bn in 2020

"For the first time in history, the Commission is issuing social bonds on the market to raise funds that will help keep workers in their jobs. This unprecedented step is in line with the extraordinary times we are living in. We are doing our utmost to preserve livelihoods in Europe. I am pleased that the countries hard hit by the crisis are receiving rapid assistance under the SURE instrument", comments Ursula von der Leyen, President of the European Commission.

Johannes Hahn, European Commissioner for Budget and Administration stressed that "with this operation, the European Commission has moved closer to the leading group in the global debt capital markets". The strong investor interest and the favourable conditions under which the bond was brought to market are further evidence of the new interest in EU bonds," he said. The "social bond" nature of the issue has helped to attract investors who want to help EU Member States support employment in these difficult times".

Further bond issues under the SURE instrument are planned in the course of 2020 following a new call for proposals procedure and the selection of another banking syndicate. In 2020, the European Commission plans to issue around €30bn of the maximum €100bn foreseen by SURE over the period 2020-2021.

17 beneficiary countries

The bond funds will go mainly to Italy and Spain (Graphic design: European Commission)
The bond funds will go mainly to Italy and Spain (Graphic design: European Commission)
All funds raised will be transferred to the beneficiary Member States in the form of loans on favourable terms to help them cover the costs directly related to the financing of national short-time working programmes and similar measures adopted in response to the pandemic. Seventeen EU Member States (see below) will be eligible to receive this financial windfall for a total of €87.8 billion. The largest recipients are Italy and Spain, which will receive €27.4 billion and €21.3 billion respectively. The other Member States can still submit applications, still within the framework of SURE.

This instrument, announced in early April 2020 by Ursula von der Leyen, has been operational since 22 September 2020 with the finalisation of the approval and signature procedures for all Member States.


Frédéric Dubessy


Wednesday, October 21st 2020



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