Bank for Governments: Rothschild & Co

IFR Awards 2021
9 min read
Gareth Gore, Christopher Spink, Steve Slater

An independent path

In a year when abundant market liquidity led many rivals to fall back on cookie-cutter solutions, one advisory firm stood out for its willingness and ability to think creatively for its various government clients around the world. Rothschild is IFR’s Bank of the Year for Governments.

While 2021 was a year of recovery for many businesses and financial institutions, for those in the public sector the second year of the coronavirus pandemic was a very different story. Many started the year already in a poor financial state, only to find themselves hit with spiralling costs and a dwindling tax base as new variants led to an explosion in case numbers.

Faced with such challenges, a trustworthy team of independent advisers was key. Time and time again, Rothschild provided vital counsel to governments around the world, many of which have a longstanding relationship with the Paris-headquartered firm, which has been giving advice to the public sector for much of its 200-year history.

Ever since the early 19th century, when it helped Britain and its allies fund the Napoleonic Wars, the firm has been a critical source of financial advice – and innovation for governments. It was one of the pioneers of privatisation programmes in the 1980s and more recently was a key adviser to Cyprus, Greece, Ireland and Portugal on vital reforms as part of those countries’ bailout programmes.

But it has never simply relied on past success to create opportunities – and 2021 was no different. As the pandemic continued to ravage government finances and made access to capital critical, the firm came up with innovative solutions for its public sector clients which not only helped them through what was undoubtedly a tough year, but also set them up for a more stable financial future.

Its work with a group of African countries illustrates this. While many of its larger rivals were pushing countries to take advantage of unprecedented bond market liquidity, Rothschild took a more counterintuitive approach, encouraging its clients to think about more complex solutions that would be more sustainable and flexible over time.

“Covid has generated some deep soul searching on how to manage finance better,” said Eric Lalo, head of sovereign advisory at the firm. “In 2019 and in 2020, a lot of emerging countries were of the view that global capital markets were good enough and liquidity was massive. Thanks to QE, there was no real worry to diversify, and to look for other sources of funding.

“But because of Covid and the growing fear that interest rates may at some point go up, we have seen a lot of clients or prospects looking for our help in diversifying away from the traditional bond market – be that global bonds, Eurobonds or domestic bonds. Credit-enhanced financing techniques have come back to life very strongly for some lower-rated countries.”

Benin is a prime example. Rothschild helped the government to structure four transactions through the year – two of which involved export credit agencies in Spain and France. The latter, a €320m loan to fund an upgrade of the country’s electricity network by Vinci Energies, was the largest ECA-backed loan ever taken out by the country.

Rothschild was also a critical adviser on two bond market transactions from the African country. It began the year with a €1bn dual-tranche bond sale, only the second in Benin’s history, which was run alongside a liability management exercise. It also helped advise on its subsequent €500m SDG sovereign bond in July, the first out of Africa, which achieved a record so-called greenium.

“We assisted them in the selection of providers and we assembled the group of lead managers,” said Lalo. “We were there during the pricing of the transaction. But we also assisted the minister in shortening the process. We were able to print the thing in three months, which not only for an African country, but for any sovereign is, if not a record, then a huge success.”

The firm also advised a number of other African countries, such as Ivory Coast on its €850m tap of outstanding bonds, its 12th transaction with the country since 2014. It helped Cameroon return to international capital markets for the first time since 2015, with a debut in the euro market that raised €685m, as well as a US$750m debt management involving currency swaps.

Its role advising Chad was also critical to the country securing a US$570m facility from the International Monetary Fund that will see it restructure all its official and commercial debt. Negotiations around the facility have been difficult and included talks with the commodity giant Glencore, which is the country’s largest private creditor.

Breadth of mandates

During the year, Rothschild had active advisory mandates from around 30 different countries, only about half of which are public because so many don’t involve public transactions – much of its work is pure advisory – or because the client wants to keep the mandate confidential. It is the best year to date for the sovereign team and comes after doubling its personnel over the last two years.

That push has led to the team winning mandates in regions where it has not traditionally been strong. The year saw it win coveted mandates in East Africa, Latin America and in former Soviet countries. Supervisory board chairman David de Rothschild and group executive committee member Alexandre de Rothschild have both been key to winning new mandates.

“We have strong involvement from the senior management of the firm,” said Lalo. “Baron David de Rothschild and Alexandre de Rothschild had some very, very meaningful contributions to our practice, either by hosting certain presidents or ministers or by visiting some countries.”

The firm has done some of its most important work this year in the former Soviet bloc. It was sole financial adviser to Uzbekistan on the September sale of its 57% stake in a local Coca-Cola bottling franchise. Then in November it was sole financial adviser to Albania on its €650m international bond offering, a 10-year transaction that priced right at the bottom of guidance.

In Ukraine, Rothschild advised the Ministry of Finance on a US$500m budget financing, its 16th transaction for Kiev in the last four years. It also helped put together an innovative green and SDG debut that raised US$825m for Ukrenergo, the state-run electricity transmission network, a deal which saw the European Bank for Reconstruction and Development come in as an anchor investor.

“Our impact and the value-add in this instance was to come up with a full SDG framework that extended to 150 pages, which meant the involvement of 15 different ministries thinking about each and every SDG goal and putting together a strategy for each of those objectives,” said Stephane Charbit, a sovereign advisory banker at the firm.

Rothschild’s achievements during 2021 weren’t just limited to emerging countries. In Europe, it worked on landmark and high-profile assignments such as the UK government’s £1.1bn sell-down of a 5% stake in NatWest, one of the largest secondary offerings of shares in the region during the year. It was sole financial adviser to Ireland on the disposal of a stake in AIB.

Sovereign contingent liabilities have also been a key focus. In Italy, it helped the airline ITA – born out of the ashes of the bankrupt Alitalia – develop a business plan to present to the European Commission. In Germany, it helped Fraport, the operator of Frankfurt Airport, to raise €1.15bn. In Hungary, it submitted the idea of a “coupon holiday” on swaps taken out by Budapest Airport.

The firm had some big wins in Australia, too. In November, it was adviser to the State of Victoria on the A$16bn (US$11.3bn) North East Link Project, a motorway near Melbourne. It was also a debt adviser to the state-owned Australian Rail Track Corp on the refinancing and upsize of an existing syndicated debt facility.

“2021 was a very interesting year during which governments realised they had to prepare for the worst and they had to think outside the box,” said Lalo. “And this is where the role of an independent adviser covering different arrays of solutions is very important and this is why we are so exhausted at the end of this year.”

To see the digital version of this report, please click here

To purchase printed copies or a PDF of this report, please email