Funding the future
WHAT'S NewS Issue 2 February 1997
ri organization
Rabobank International's global expansion, and the associated increase in our
balance sheet total, will be partly covered by an increase in the size of our total
funding program of some 10 to 20 percent.
Haijo Dijkstra of the funding and structures unit talks us through the process.
The overwhelming majority of this
increased need will be raised through
continuing tranches of the Euro Medium
Term Note (EMTN) program.
This program, established in 1991, has
already raised more than ECU 7 billion
since its inception. lts ceiling is now due to
rise from ECU 7.5 billion to ECU 10
billion. Used both for debt issuance and the
thandling of deals, it is flexible both with
.egard to the duration and currency
composition of each tranche. Given our
position as the Netherlands' biggest savings
bank, and our cooperative structure, which
of course implies that dividends need not be
paid and thus profits retained within the
group, we are uniquely advantaged when it
comes to funding our needs. Of course, this
also means we are barred from raising
funds in the form of new equity issues; the
real challenge of the funding program is
thus to keep both investors and customers
satisfied on a continuing basis.
SKILLFUL BALANCE
The three most desirable elements of every
deal are (a) that the spreads should be tight,
(b) that they should be consistently attractive
to our investor base, and (c) that the
fcpremium we pay over benchmark should
^emain stable or decline as the bonds are
absorbed by retail and institutional investors.
This is illustrated by the graph, which
indicates the spread performance of a USD
bond. We issued at 4 basis points (bp) over
US Treasuries, and the deal now shows 24 bp
under Treasuries. The short-sighted focus on
cost-efficient funding should be skillfully
balanced against a long-term concern for
meeting the client's overall needs.
MULTICURRENCY SWAPS
Rather than rely solely on Dutch retail and
institutional investors, we are firmly
committed to diversifying of our funding
sources both in terms of the markets and
the different currencies we are able to tap.
We are funding ourselves in a number of
different currencies that range from
Guilders to Hong Kong dollars to South
African rand and, most recently, Czech
crowns. Of course, given that over 70
percent of our assets are guilder-based,
most of the foreign denominated fundings
are swapped hack into the Dutch currency.
TANGIBLE BENEFITS
Control and oversight over the capital
markets funding operation is in the hands
of the Utrecht-based Funding and
Structures team that includes Dick Visser,
Katja Kammer and Theo Hendriks. This
policy avoids dilution of our funding target
and makes it possible to insure that our
bond spreads are performing consistently
well. In addition to the loyalty benefits that
come from our high commitment to
enhancing cliënt value, we continue to
derive tangible benefits from our unique
triple-A credit rating. This comes in the
form of marginally (but consistently) lower
funding costs than those paid by nearly all
of our global competitors.
GRATIFYING RESULT
The continuing attraction of our issues was
evidenced during the first week in January,
when a USD 250 million four-year
Eurobond deal hit the sereens amid a flurry
of competing issues but was nevertheless
snapped up by investors remarkably fast.
The funding and structures desk team (fd.t.r.)
Dick Visser, Haijo Dijkstra, Theo Hendriks
and Katja Kammer.
To top this off, it was voted the weeks' top
dollar deal in the Bondwatch Poll, which is
conducted every week among the 20
leading primary market houses on the
global market. 'This was especially
gratifying,' says Katja Kammer.
OPEN DISCUSSIONS
'We will remain vigorous and proactive in
our investor relations policy,' says Dijkstra.
'We are committed to keeping our investors
fully informed about our position as the
Netherlands' largest network bank, about
our expanding activities abroad, and about
our increasing strength relative to other
financial institutions.' Usually the
management of Rabobank International
and the Investor Relations officer Freek
Hoek plus the Hunding and Structures desk
are involved in these presentations. Dijkstra
notes that open discussions often follow
our road shows, and the team makes an
effort to provide useful insights into such
timely topics as the introduction of the
Euro and its implications for our
continuing market position.
TAX EXEMPT
In addition to the EMTN programme
mentioned above - involving both
syndicated and non-syndicated loans - we
(continued at page 14)
FUNDING
Onze wereldwijde expansie
zorgt voor een toename
van onze funding behoefte.
Als grootste Nederlandse spaarbank, die als
coöperatie haar winst aan de reserves kan
toevoegen, hebben wij een voordeel. De
keerzijde is echter dat wij geen aandelen-
emissies kunnen doen. Het grootste deel van
onze funding halen wij binnen met een Euro
Medium Term Note programma. Daarnaast
vinden ook private placements en openbare
leningen plaats.
PERFORMANCE OF OUR USD-BOND, ISSUED AT 4BP OVER
US TREASURIES, NOW SHOWING 24BP UNDER.
buy
6.40
6.20
6.00
5,80
5,60
15 22 29 6dec 13
4oct 11 18 25 1 nov
27 3jan'97 10
