CFR Marfa pays 10.5% for debut abroad

CFR Marfa has already raised 100 million euros from its first eurobond issue on the international capital markets, released at the end of last week and due to close any minute now, sources close to the deal told Ziarul Financiar.
CFR Marfa borrows money for five years and pays 10.5% a year in interest, which is more than the Romanian State would have to pay if it was to borrow at this moment.
All this in addition to the fees of the issue brokers, Deutsche Bank and Schroeder Salomon Smith Barney – Citibank.
Why this high price? The company is not backed by the State’s guarantees in this venture, as neither does it have any previous history on the foreign capital markets. Romania borrowed at 8.5% this April when it released its latest bond issue maturing in ten years. The yields of the eurobonds launched by Romania so far range between 7.28% – 7.3%.
“CFR Marfa’s eurobonds could be assimilated to junk bonds, due to the high interest level and considering this company has never put anything out on the market,” a financial analyst says.
The junk bonds usually bear three or four percent higher interests than government bonds, for instance. At the same time, they get ratings below the Baa/BBB level. CFR Marfa’s eurobonds were granted the B3 rating by Moody’s, while Standard & Poor’s assessed the risk at B plus.
Both ratings are in line with Romania’s sovereign rating and below the safe investment level.
Sources close to the deal, however, say those assimilating CFR Marfa’s eurobonds to junk bonds are rather pushing it. They say the international markets welcomed the bond issue, which also benefited from favourable circumstances.
“Considering our company’s position, the country risk or the rating we got from the financial rating agencies, I think we got a good interest. Our estimates show we would have been unable to bear an issue worth more than 100 million euros, because it would be hard to absorb,” Vasile Tulbure, CFR Marfa chairman told Ziarul Financiar.