Market outlook for 2008

For the second time since CADES was founded, the financing requirements for 2008 are dependent only on the redemption of securities that will reach maturity and interest payments. As was the case in 2007, these redemptions will be presented for payment in the second half of the year, between the months of October and December. In addition, several significant due dates will arrive in the very first months of 2009, which could mean that CADES will anticipate the financing of these redemptions at the end of 2008, market conditions permitting.

CRDS tax revenue is estimated to be 5.96 billion euros, while renewals of short-term notes come to 3.6 billion euros. Bond maturities will come to 6.2 billion euros, while the due dates on structured borrowings and private placements will create a 1.9 billion euro requirement. Interest payments are expected to amount to 3.2 billion euros.

The financing program (both short- and long-term) will thus come to around 9 billion euros.

A total outstanding of at least 2 billion euros will be maintained in short-term programs in the interest of ensuring reliable and regular access to these markets, which in 2007 enabled CADES to adjust to difficult market conditions while enjoying very attractive financing costs.

The mid and long-term markets will thus be solicited to the tune of 7 billion euros, which could be broken down as follows:

• €3-6 Bn Benchmark issues in euro due in 5 to 12 years 
• €1-2 Bn Issues pegged to French inflation with maturities of up to 12 years
• €1-2 Bn Benchmark issues in currencies other than the euro: USD, AUD, CAD, GBP, JPY, etc.
• €0.5-1 Bn Structured private placements, all currencies (AUD, NZD, etc.)

The size of the CADES financing program for 2008 is close to the program for 2007, and corresponds to a normal accumulated debt amortization process in terms of pacing. Market makers and investors have integrated the decrease in the number of new CADES issues, striking a balance between the scarcity and the liquidity of CADES securities in the secondary markets. CADES should be able to capitalize on this situation, in order to ensure that it is as ready as it can possibly be for any further transfers of new debt.

Highlights of 2007 :

In 2007 and for the first time since it was founded, CADES only had to finance the redemption and interest payment on its own bond issues. To meet this requirement, CADES borrowed 5.6 billion euros in the medium- and long-term capital markets, and acquired 3.7 billion euros through short-term financing arrangements. The volume of issues declined substantially compared with the two prior years, as CADES completed the rollout of long-term financing for debt transferred to it by law in 2004.

A new, 10-year benchmark issue in euros was introduced in the month of March as a way of pursuing the strategy of ensuring the value and transparency of CADES issues in all global markets.

Two of its issues in US dollars were transformed into euros and at floating rates, due in 5 and 3 years, respectively, under very attractive financing terms, ensuring the diversification of the CADES investor base.

The new tranche of the 10-year inflation linker launched in July was raised from 1.25 to 2 billion euros to ensure the liquidity of secondary market securities and make this a benchmark issue.

Issues of structured securities and private placements accounted for a little less than 5% of the financing program. This is slightly below the percentage in previous years, attributable to a more challenging financial environment that forced the closure of this market around mid-year.

The short-term financing programs (BT, ECP, USCP) allowed CADES to meet its commitments in a particularly tight market, especially in the fall, at exceptional financing levels with a total of 18.8 billion euros issued (92% in US dollars). Indeed, issuers like CADES stood out as a clear alternative placement for liquidities that had been invested in more risky assets before the crisis (notably asset-backed commercial paper) or loaned to banks.

Highlights of 2006 :

CADES pursued its issue strategy, based on benchmark bonds in euros, with the aim of ensuring issuer visibility and establishing solid benchmark credentials. Two new tranches were issued, one in March, due in 10 years, and one in July, due in 15 years.

The significant proportion of US-dollar issues transformed into euros at floating rates is attributable to a particularly advantageous set of liquidity and financing conditions in this market throughout the year. CADES issued its longest bond in dollars (10 years).

The year 2006 was also marked by the determination of CADES to actively pursue its diversification strategy. As the rollout of a fixed-rate “Kangaroo” issue program in Australia suggests, one of the goals of CADES is to meet the needs of domestic investors. Two bonds were issued, due in 3 and 5 years, respectively, under this new program. In a parallel development, the first CADES bond in Canadian dollars was issued in October, seeking the same objective.

In July, CADES redeemed its first inflation linker (CADESi 3.80% 07/25/2006) for a total principal amount of 3.7 billion euros. In order to maintain a satisfactory percentage of its liabilities indexed as well as its presence as a benchmark issuer in this market segment, CADES initiated the issue of a new 10-year tranche due 07/25/2017 for a total of 1.250 billion. Two top-ups to existing tranches for 200 million euros each were also carried out in the early part of the year.

Last but not least, short-term programs (BT, ECP, USCP) were once again very active, with a total of 19.8 billion euros issued in 168 transactions (81% of which were in US dollars), a move that limited recourse to short-term bank borrowings. The 1-year credit facility made available by a syndicate of ten banks for a total of 10 billion euros was therefore reduced to 5 billion euros and extended. On December 31, 2006, it had only been drawn down for 100 million euros.

Highlights of 2005:

In 2005, a € 2.3 billion issue matured and the final € 3 billion was made to the French State .

In the first months of the year, CADES began transforming some of the short-term debt it recently contracted into medium- to long term maturities.

A 10-year €3 billion note (due 2015) was issued in January, followed by the launch of two new benchmarks maturing in 2010 and 2020 for € 4 billion each.

Opportunities to continue issuing other maturities – 5- year and 15 year – have been pursed but investor demand has firmed up sufficiently to launch of a successful € 3 billion note due 2013.

Outstanding issues have also been tapped up provided that market demand exists and that doing so does not adversely impact performance of the notes in question.
CADESi (pegged to French inflation) were so tapped up for an amount of € 300 million for the 2019 and of € 600 million for the 2013.

Of the 35 billion CADES issued in 2005, € 14 billion were fixed-rate euro benchmarks issues € 3.5 billion were USD denominated benchmarks, 2.6 billion private placements and 0.9 billion were inflation –indexed.

Highlights of 2004:

In 2004, two hefty bond issues matured in July: a 6.375% issue in Dutch florins for the equivalent of €950 million, and a 3.375% benchmark issue in euros with a face value of €3 billion.

In light of these bond redemptions, the provisions of the new Act of August 13, 2004, CRDS revenues (an estimated €4.85 billion) and the remaining payments to the government and various social security funds (€4.1 billion), the 2004 program totalled €41 billion.

CADES's financing decisions were made in line with its five main strategies, as well as market conditions and the strength of end-investor demand:

In late June, CADES issued a new benchmark euro note maturing in 2009. Strong demand from investors enabled CADES to launch the note with a face amount of 3 billion euros. While the bulk of the issue program was carried out in the last quarter, CADES primarily determined the launch date of each issue on the basis of investor demand for the instruments likely to be used with the offered maturity dates.

A 10-year fixed-rate issue (4% 25/10/2014) was tapped up by €4 billion, and a 15-year maturity (4% 25/10/2019) was tapped up by €3 billion. In addition, a new issue indexed to French inflation maturing in 2019 was launched and then increased once, bringing the total to €1.3 billion.

CADES demonstrated to investors that its access to different sources of liquidity is more than sufficient to ensure its short-term needs.

Accordingly, CADES is poised to approach the bond markets with confidence, and can take the time needed to secure the best conditions in terms of maturity, currency and size of issue.

Market highlights in 2001 and 2002 / Prospects for 2001 to 2003

CADES took full advantage of the strong demand for issues indexed to French inflation (excluding tobacco). A third issue, due in 2011 and initially completed in 2002, will be regularly tapped up.

Paradoxically, the increase in CADES’ annual payment to the French government and payments made to the French social security administration have enabled CADES to engage in larger issues and also to increase the liquidity of outstanding notes.

In an increasingly difficult investment environment, the excellent triple-A rating and 0% solvency ratio assigned to CADES give it access to financing costs which, at just a few basis points above the government rate, are among the lowest in the market.

Focused on the goal of maintaining a high degree of liquidity, while leveraging the relative scarcity given the gradual redemption of the debt, the CADES issue strategy has consistently produced excellent results, helping to keep CADES remain among the most sought-after issuers in the market.

CADES’ communications initiatives have attracted an increasingly broad spectrum of investors – French and international – to its liquid bonds, while also soliciting private placement requests.

The financing strategy in 2000

In 2000, CADES' financing strategy was based on three principal elements:

- Inflation-linked bonds,
- MTN programmes,
- Electronic markets.

Since the first CADESi issue launched in March 1999, inflation-linked bonds have been an important element of CADES' financing strategy. The two existing indexed issues, CADESi 3.15% 2013 and CADESi 3.80% 2006 (launched in February 2000) saw their value (of 1.5 billion euros and 650 millions euros respectively) increase significantly in line with market demand.

• CADESi assimilation's technical file (July, 25th 2006)
• Download the investors' introduction of CADESi (July, 25th 2013) (pdf : 112 Ko).
• Press release dated February, 9th 2000
• CADESi's technical file (July, 25th 2006)
• Download the investors' introduction of CADESi (July, 25th 2013) (pdf : 112 Ko).
• Press release dated January, 26th 2000

The MTN programmes (BMTN and EMTN) are an important part of the CADES' debt financing and represent more than 1.2 billion euros issued since the beginning of 2000. The flexibility of these programmes allows CADES to obtain very favourable financial conditions.

The most innovative development for CADES in the near future will, without doubt, be based on electronic markets. Following the launch of the first e-bonds, a number of trading platforms are being created, both on the Internet and on independent structures. CADES is determined to participate in this evolution.

In this way, CADES will enable investors to benefit from the increased liquidity resulting from the new systems, and should see its principal lines (euros 3.375% 2004, 6% 2005, 6.25% 2007, 5.125% 2008 and 5.25% 2012) recognised among the most liquid benchmarks, with CADES classed as a leading issuer in euros.

The financing strategy in 1999

The recent broadening of its remit scope has further enhanced its status, allowing CADES to continue the consolidation of its debt. 86% of this consolidation were financed by long-term programmes by August, 31st 1999.

1999 was marked by the launch of two bond issues which today are market references:

• a fixed-price issue maturing 07/12/2004 for an initial amount of 1.5 billion euros, which was increased to 2 billion euros a short time after the launch;
• an inflation-linked bond issue (CADESi) of 1.5 billion euros, due on 07/25/2013. This is the first bond of this kind issued inside the euro zone.

• Download the investors' introduction of CADESi (July, 25th 2013) (pdf : 112 Ko).
• CADESi's technical file (July, 25th 2013).
• OAT inflation-indexed bonds' information from the French Treasury
• Press release dated March, 17th 1999.

In 1999, CADES had continued to benefit from a combination of positive factors. The French government had reiterated its objective of balancing the Social Security accounts in 1999. Furthermore, economic indicators in France and in its principal partner countries appeared favourable. Therefore, CADES was aiming to increase its presence on the euro market and, according to market opportunities, to develop its MTN programmes, which offered the flexibility necessary to rapidly react to specific needs.

Taking into account the other operations, and thanks to the MTN programme in particular, by August, 31st 1999, CADES had carried out medium- and long-term issues of 4 billion euros, on a 4.5 billion euros planned funding programme.

Finally, following the example of the French State, CADES planed to issue inflation-linked bonds (CADESi). As for its debt as a whole, priority was given to the paper's liquidity. The size of the issue can be adapted to the demands of the market.

The refinancing of the additional debt transferred to CADES on January, 1st 1998 and the CADES' strategy for 1998