Bulgaria Expects Great News on Eurobond Float, FinMin SaysFinance | July 1, 2012, Sunday // 19:14| views
Bulgaria's Finance Minister Simeon Djankov. Photo by BGNES
Bulgarian Finance Minister and Deputy PM Simeon Djankov has made clear his high expectations for the country's upcoming Eurobond float.
"There has been a calming of the international markets since the EU leaders' summit on Friday. Bulgaria will benefit from that because it is about to float Eurobonds," Djankov stated in the Black Sea city of Burgas on Friday, as cited by Dnevnik.
"I expect great news in this respect by the end of next week," he added.
Bulgaria started on June 25 a series of investor meetings across Europe ahead of the eurobond issue that the country plans to float this year.
On June 8, Bulgaria's Parliament ratified contracts with BNP Paribas, HSBC and Raiffeisenbank as mediators for the eurobond issue. The three banks will organize the meetings with investors.
Bulgaria plans to tap international markets to raise funds to repay the first tranche of about EUR 835 M (USD 1.07 B) in 11-year eurobonds maturing on January 15, 2013.
The bonds offered on international markets will be worth up to EUR 950 M.
The interest rate will range between BGN 8-12 M per month, Finance Minister Simeon Djankov explained.
"That's why we decided to start in the spring. The second tranche matures at the beginning of 2015, so the next government will be in the same situation that we are now," he added.
BNP Paribas, HSBC and Raiffeisen have been appointed to advise the Bulgarian state as well as manage the sale of the bond.
Bulgaria is likely to issue its five-year sovereign eurobond on better terms than the country's foray into international capital markets back in 2002, according to analysts.
The Balkan country expects the interest rate - or yield - that it would have to pay on this new five-year bonds to be 5.5%, 2% lower than the 11-year eurobonds issue maturing on January 15, 2013.
According to unconfirmed information Finance Minister Simeon Djankov has decided to go for a five-year maturity partly because of the low indicative prices that the three financial institutions offered - less than a 4% yield - on bonds with that maturity.
The finance minister is also believed to be counting on the banks' assurance that managers will help Bulgaria tap international markets at an affordable cost if the eurobond placement does not draw strong demand.
Bulgaria's Finance Minister Simeon Djankov defended in April the draft law that allows the government to purchase unrated Bulgaria bonds after it came under fire by the European Central Bank (ECB).
In an opinion requested by the Bulgarian government and dated April 13, ECB President Mario Draghi argued that such a law would discriminate against foreign debt securities, which do require a credit rating.
Finance Minister Simeon Djankov responded in a letter, stressing that any Bulgarian bond issues purchased would have interest rates based on market benchmarks.
Analysts have warned that Bulgaria's government may be forced to struggle with volatile markets if it misses out on the current benign conditions.
Bulgaria is rated Baa2 by Moody's Investor Services Inc., and BBB by Standard and Poor's Corp.
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