Bucharest bonds on foreign market

The consortium made up of the JP Morgan and ABN Amro investment banks is very close to winning the contract for the placement of the 120 million-euro eurobond issue that Bucharest City Hall is planning for early next year, City Hall sources told Ziarul Financiar.

The two banks are likely to emerge as winners of a tough contest, that has included competition from Credit Suisse First Boston, Deutsche Bank, Citibank, BNP Paribas and UBS Warburg.

The value of the intermediation contract varies and generally accounts for up to 1% of the sum placed plus associated fixed expenses. This case will involve a sum of around one million dollars if the issue is a complete success. JP Morgan and ABN Amro representatives were unavailable for comment.

According to sources, however, the banks have as yet not been informed of the outcome of the bid evaluation.

The eurobonds will probably be listed on Luxembourg Bourse. The terms of the issue (the interest rate and the precise timing) are still to be settled.

This is the first time a city hall in Romania has resorted to foreign capital markets for financing, with domestic municipal bond issues having been favoured until now.

Bucharest City Hall will use the money to finance infrastructure projects. The city hall had originally planned to launch a series of bonds that would have reached a total value of 500 million euros. To date, the Finance Ministry has only approved issues worth 120 million euros.

The fashion in municipal bonds began three years ago, with city halls requiring money for various projects. So far city halls have only addressed the domestic market.