Credit Agricole with €1bn Export-Linked Bond

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Credit Agricole Public Sector SCF is in the market with a covered bond backed by export loans guaranteed by the export credit agencies (ECAs) of highly-rated sovereigns, according to an investor presentation by the French issuer and a research report from Bank of America Merrill Lynch.

The initial cover pool is ultimately guaranteed by France, the UK, and Germany.

A presale report from Moody’s Investors Service indicated that the size of the issue would be €1 billion ($1.3 billion). The issuer has announced a total program for €10 billion. The targeted maturity is seven years, and the arranger is Credit Agricole.

Both Moody’s and Standard & Poor’s have given the transaction a preliminary triple-A.

BofA Merrill analysts had a sanguine view of the deal, writing that “French (covered bond) law is strong in our opinion and covered bonds are systemically important in France, reducing tail-risk.”

While all the current loans are guaranteed by export credit agencies attached to the governments of France, the UK, and Germany, the deal’s structure allows for other guarantors, the issuer said in the presentation. The underlying sovereigns, however, must be rated at least ‘A3’/‘A-.' About 58% of the collateral consists of aircraft loans, which is reminiscent of a landmark transaction issued by Norddeutsche Landesbank in July.

The borrowers in the cover pool are spread through 14 countries, with a number located in Europe. Among countries on other continents with a good deal of weight in the portfolio are South Africa, which accounts for 10% of the borrowers, and South Africa (11%).

The issuer - a fully-owned unit of Credit Agricole - has a portfolio of ECA-guaranteed loans totaling nearly €16bn, and is a leader in aircraft finance.  

The originators is a Société de Crédit Foncier (SCF), a specialized credit institution authorized and licensed under French law and regulated and supervised by French banking authorities.


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