Bonds for residents and non-residents

Romania is preparing to release a new eurobond issue on the international capital markets. The new issue is worth 500 million euros and matures in seven years, Finance minister Mihai Tanasescu told Ziarul Financiar.
“We have already had preliminary talks with the main banks interested in order to assess the international markets conditions. The analysis of the maturity/price ratio showed the best solution for Romania would be to borrow for seven years,” Tanasescu said.
He explains the shorter maturity compared with the ten years of the 2002 issue does not account for a deterioration of Romania’s position on the foreign markets. “The analysis of the foreign debt service shows it is not economical for Romania to borrow for more than ten years, because yields will no longer justify costs,” the Finance minister explains.
Tanasescu is convinced Romania will obtain at a very good spread. “I spent three hours in a salon of the Four Seasons Hotel in New York in 1998 waiting for investors interested in Romanian bonds. We finished our meal and still no one had shown up. Things have changed in the meantime, Romania has a solid position abroad and investors will stand in line for Romanian eurobonds,” Mihai Tanasescu says.
The new eurobond issue could be released as soon as the American rating agency Standard & Poor’s (S&P) announces an upgrade of Romania’s country rating from B plus to BB minus. The S&P Board might make a decision in this regard at the end of March.
Last year’s 700 million euro issue was declared the best deal for a state on Europe’s emerging markets by the EuroWeek magazine. The bonds were issued for a ten-year maturity and bore 8.5% interest. The interest has gone down towards 6% in the meantime. The deal was brokered by a syndicate of banks comprising Citigroup/Schroeder Salomon Smith Barney, Deutsche Bank, ING and JP Morgan. Citigroup and JP Morgan were also declared by EuroWeek as the best transaction brokers in Europe, Middle East and Africa.
Until the time comes for the eurobond issue to be released, the Finance Ministry will release an euro-denominated bond issue for the local market probably as soon as next week. The issue will come with a record maturity for the Romanian market: three years. It will be worth 100 to 200 million euros, depending on the market conditions.
“We have already discussed with several banks that showed interest. We are positive the market will have a very healthy appetite,” Mihai Tanasescu said.
He explains the interest of the domestic bond issue is built around the rates on the interbank market correlated with the interests of the euro-denominated credits on the international market. “We would normally have a margin above what the market offers right now,” Tanasescu says.
He added that increased confidence in the domestic currency encouraged the Treasury to extend the maturities for the ROL bonds, as well, which now reach two years at best. razvan.voican@zf.ro