Friday 03 April 2020

Proceeds from NIB's first-of-its-kind €1bn Response Bond and EIB's €1bn Sustainability Awareness Bond to provide healthcare, as well as other financial support to member countries impacted by Covid-19 in the case NIB's Response Bond – highlighting the role of financial markets in tackling the crisis.


As governments and other public-sector bodies across the continent ramp up their response to the Covid-19 pandemic, BNP Paribas has brought to the market two landmark transactions. Helsinki-based Nordic Investment Bank (NIB) and the European Investment Bank (EIB) have both issued bonds this week to provide funds to European nations as they shore up healthcare and financial systems to manage the impact of the ongoing crisis.

"Sustainable finance has a vital role to play in mobilising the response to Covid-19," said Agnès Gourc, Co-Head of Sustainable Finance Markets at BNP Paribas. "The NIB Response Bond and EIB Sustainability Awareness Bond exemplify this, helping deliver essential funding to tackle this crisis in a highly transparent way across multiple fronts, including the efficient operation of healthcare systems, as well as financial support and labour market solutions in the case of the NIB's Response Bond."

NIB Covid-19 Response Bond: the first of its kind

BNP Paribas acted as joint lead manager on NIB's inaugural €1 billion Response Bond, due April 2023, to provide loans to projects that aim to relieve the social and economic impact of the Covid-19 pandemic – the first deal of its kind in the European markets. As part of its new NIB Response Bond Framework, proceeds from the three-year bond will be made available to its eight member countries (Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden). The funds raised will "promote the efficient operation of healthcare systems, and provide financial support and labour market solutions to alleviate frictions to supply chains." (See NIB full press release here.)

The NIB's Response Bond is specifically designed to tackle the far-reaching impact of the Covid-19 pandemic across the breadth of the economy. The use of proceeds will be for eligible projects that fall under the following categories:

  1. Lending to public sector – including healthcare services, social security expenditures such as unemployment, sickness, child and elderly care benefits, and financing governments and government-related institutions

  2. Lending to financial sector – financing of financial institutions to provide funding to small- and medium-sizes enterprises and mid-cap corporates affected by the pandemic

  3. Lending to real economy sector – financing of large companies in the medical equipment and healthcare sector facing an increasing demand for equipment or services related to the pandemic, as well as financing of companies in the infrastructure sector that are in need of funding due to supply or demand side disruptions in their operations

"Swift and bold actions are needed to alleviate the effects from the pandemic, and NIB's Governors have urged the Bank to increase lending to businesses affected by the crisis in the region," says Lars Eibeholm, Head of Treasury at NIB. "The NIB Response Bond is our first reply to raise funding and back these actions. The Response Bond framework supports us in providing transparency and in communicating a clear strategy to investors and stakeholders."

EIB extends Sustainability Awareness Bonds programme

BNP Paribas also acted as joint lead manager on The European Investment Bank's (EIB) new €1bn Sustainability Awareness Bond (SAB) due May 2028. The EIB's SABs, first launched in September 2018 to directly finance sustainability projects, have now been extended to include support directly related to the fight against Covid-19.

The bond is part of a package of measures aiming to mobilise up to €40 billion to support European companies, health interventions, and the economy as a whole, through the financing of urgent infrastructure improvements and equipment needs in the health sector. The bond will specifically fund clearly defined health projects that are in line with pre-defined technical screening criteria set by the EIB.


SSAs and Covid-19

Funding the public and private sectors is emerging as a crucial issue during the global pandemic, with widespread lockdowns hindering growth and prompting governments to announce huge rescue packages to stimulate economies. Access to finance will be vital, with bond issuance from sovereigns, supranationals and agencies (SSAs) playing a critical role in responding to the fiscal pressures and economic damage caused by the crisis.

These bonds from the NIB and the EIB are examples of the role the financial sector must play in helping to provide funding to the international economy during crises, raising capital to finance overstretched social and healthcare systems. As the economic consequences of the Covid-19 pandemic will be far reaching, issuance from sovereigns and supranationals will play a central role in keeping economies running and aiding recovery in the coming months.


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