The International Bank for Reconstruction and Development (World Bank) today announced a $250 million floating rate note (FRN) issue in the Eurodollar market. It is the first FRN borrowing by the Bank and is the first FRN Euromarket issue to be priced with reference to U.S. Treasury Bills.
The issue consists of 10-year notes, which will be redeemable at the option of noteholders at par in February 1989. The notes will provide quarterly payments of interest and the interest rate will be reset quarterly at 35 basis points over yields on 91-day U.S. Treasury Bills.
The issue is lead managed by Bankers Trust International Limited with Credit Suisse First Boston Limited acting as co-lead manager.
Background Note
Mr. Eugene H. Rotberg, Vice President and Treasurer of the International Bank for Reconstruction and Development (World Bank), commented today on a new IBRD note issue:
"Today's issue is the first using the U.S. Treasury bill as a benchmark for a floating rate note issued outside the United States. The opportunity to make such an offering did not exist as recently as several weeks, ago. However, the narrow spread that currently exists between LIBOR and Treasury obligations combined with the strong demand for floating rate notes, which has led to a sharp decline in spreads, has permitted us to combine the volume and maturity in the European market with the Treasury bill benchmark."
"Today's offering is for an issue of $250 million in the Euromarket in the form of a floating rate note 35 basis points over the money market yield of 3-month U.S. Treasury Bills. The issue has a final maturity of 10 years with a put provision for investors after the first 5 years."
“It is a first for the Euromarket and represents a highly satisfactory utilization of our authority to borrow variable rate dollars in the present fiscal year. In the long term, we believe that this World Bank issue represents a constructive evolution in the Eurodollar market since it will permit the use of a stable benchmark - the U.S. Treasury Bill - to price an issue rather than LIBOR which has heretofore been used as a benchmark. Should the market prove receptive to this new instrument, substantial benefits could accrue to other borrowers, particularly sovereign credits.”
