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​UK foundation Wellcome Trust prices first euro bond

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The Wellcome Trust – the UK’s largest charitable foundation, with an endowment of £18bn (€23.5bn) – has priced €400m worth of bonds with a maturity of 12 years, falling due in 2027.

The issue – the trust’s first in euros – is priced at a spread over mid-swaps of 40 basis points. 

Wellcome said the final coupon of 1.125% was the lowest ever for an Aaa/AAA-rated corporate in the euro bond market.

It is also the lowest ever coupon in the euro bond market for a corporate issuance with a tenor of more than 10 years.

The initial order book was seven-and-a-half times oversubscribed.

Bank of America Merrill Lynch, JP Morgan and Morgan Stanley acted as joint lead managers of the issue.

Wellcome spends more than £700m each year on its mission of improving human and animal health, largely through funding biomedical research and supporting education.

The proceeds of the bond issue will be used for the trust’s research activities, allowing it to reinvest more of the returns from its investment portfolio.

Returns on the trust’s investment portfolio have been 10% annualised over 10 and 20 years.

Over the past five years, they have totalled 75%, with a positive return for each year.

For the year to 30 September 2014, the portfolio delivered returns of 15.4%.

This performance was made up of double-digit returns in each major asset class, and represents the third successive year of double-digit portfolio performance.

The Wellcome Trust is currently rated Aaa (stable) by Moody’s and AAA (stable) by Standard & Poor’s, and said it was its policy to maintain these ratings.

The trust initially issued bonds in sterling in 2006, the first UK charity to do so.

Successive sterling bonds were issued in 2009 and 2014.

Danny Truell, CIO at Wellcome Trust, said: “These bonds represent our inaugural issuance in euros, and we are delighted to be able to extend access to our strong balance sheet to a broader investor base.

“We believe we are the first independent charity to issue long-term euro debt, and it is testament to the strength of our financial position that we have seen such strong demand for these bonds.”

He added: “It has been our strategy to review market conditions regularly and to access the bond markets when circumstances are appropriate.

“We are pleased to be able to include the euro bond market in this ongoing assessment of opportunities for the trust.”

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