Allen & Overy advises syndicate of banks on L-Bank's issue of innovative EUR 500 m SOFR bond
18 March 2019
Allen & Overy has advised a syndicate of banks on the successful issue of a EUR 500 m bond (ISIN: XS1961019426) by Landeskreditbank Baden-Württemberg – Förderbank (L-Bank) with a coupon linked to the SOFR (Secured Overnight Financing Rate).
The syndicate comprised Bank of Montreal, London Branch; Deutsche Bank AG, London Branch; J.P. Morgan Securities plc and RBC Europe Limited as joint lead managers. Bank of Montreal also acted as technical lead.
The bond pays a variable coupon (SOFR Daily Compounded), runs for a term of three years and has been admitted for trading in the regulated market of the Luxembourg Stock Exchange. The issue met with high demand from investors both in Germany and abroad and was thus oversubscribed.
The SOFR is based on the US repo market, where short-term liquidity is traded and hedged by way of US US government securities. Unlike the LIBOR (London Interbank Offered Rate) with its underlying estimates of the rates at which banks would grant each other unsecured loans, the SOFR is based on real transactions.
In October 2018, L-Bank was the first European development bank to issue a floating rate bond with a coupon linked to the SOFR (Weighted Average); the issue of the new bond whose coupon is linked to the SOFR (Daily Compounded) now marks yet another innovative move. By issuing these two bonds L-Bank is responding at an early stage to the impending discontinuation of LIBOR. Allen & Overy had also advised Bank of Montreal as sole lead manager on this previous bond issue.
As development bank of the federal state of Baden-Württemberg, L-Bank is commissioned by the state to support the federal state of Baden-Württemberg in the performance of its public functions, in particular in the areas of structural, economic and social policies, administering and implementing development measures in accordance with the subsidy regulations of the European Community.
The Allen & Overy team advising the banking syndicate was led by partner Christoph Enderstein and included associate Sang-Woon Lee and transaction support officer Beate Loris (all International Capital Markets, Frankfurt).
The Bank of Montreal in-house counsel responsible for the bond issue was Sam Bardon.
Allen & Overy's Debt Capital Markets team advises both investment banks and issuers in connection with domestic and international debt capital markets and structured finance transactions, in particular on bonds, commercial paper, covered bonds (Pfandbriefe), structured bonds, securitised derivatives, hybrid instruments, registered notes, Schuldschein loans and debt issuance programmes, as well as related regulatory issues.