Luxembourg's first bond issue in a decade is progressing smoothly but has not reached the 2 billion euros-worth of quality bids targeted by the sovereign, a lead manager told Reuters on Friday. The syndicated sale of 3.75 percent December 4, 2013 OLUX was opened on Monday and aimed at retail investors in Belgium, The Netherlands and Luxembourg without a tranche reserved for institutional investors.
According to the rules for such issues, the coupon is published at the outset of the sale and the Grand Duchy of Luxembourg - the only euro zone member state which currently has no outstanding debt - is seeking to issue 2 billion euros of paper.
"The books are open and gathering momentum. It is fair to say we have not yet reached the 2 billion euros target level but if we do the offer, which is due to close on November 21, will be closed sooner," the lead manager said, declining to be named. He said there was no intention to open the offer to institutional investors.
"Such a sale is not currently in our thinking but there is the possibility of this," the manager said. He declined to detail in what circumstances an institutional issue might be considered - whether to mop up unsold paper or, conversely, as a boost to an issue lapped up by retail investors.
Luxembourg's last bond issue was redeemed on May 23, 2007 and the last auction the tiny state conducted was in 1997 - before the introduction of the euro currency in 1999. Luxembourg has hired Banque et Caisse d'Epargne de l'Etat, BNP Paribas, Dexia, and Fortis to lead manage the sale. Co-lead managers are Banque de Luxembourg, ING, KBL European Private Bankers, and Raiffeisen. "Looking at the rapid pace of the book building yesterday, it seems to me that demand should clearly exceed the supply," said David Schnautz, a bond analyst at Commerzbank in Frankfurt.
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