Government has money to spend

The Finance Ministry on Monday launched Romania’s largest eurobond issue on the capital markets so far. The value of the issue (600 million euros) was higher than expected.

Finance minister Mihai Tanasescu says the actual demand for Romanian eurobonds amounted to one billion euros.

The bonds are due in seven years and bear 10.625% yearly interest in euros, 592 percentage points above the German bonds due at the same time. The bonds Romania sold early this year bore 11.5% interest.

The bonds were released below their face value, that is 99.4%, which means the yield (the actual interest) reaches about 11%.

The leaders of the operations were Chase Manhattan International Ltd, Credit Suisse First Boston and J.P. Morgan investment banks, while the co-leaders were Alpha Bank Greece, Deutsche Bank and ING Bank.

“The demand amounted to more than one billion euros, while the price was the basic element in finalising the issue. This is the largest amount Romania has ever managed to raise over the past ten years at the best price, considering the risk degree established by the rating agencies,” Mihai Tanasescu said.

He added that “following this issue, the funding of the budgetary deficit is complete and the funding source is not inflation generating.

Romania will proceed with its policy of borrowing from international markets, at the same time focusing on getting longer maturity and lower costs.”

The Romanian bankers say the result of the issue is good and will be welcomed by the foreign banks.

“The result was more than positive, because this issue was so quickly subscribed. This means a confirmation of the country rating recently granted by the Standard & Poor’s agency. The immediate effect I’d like to mention is that IMF’s decisions about Romania will be easier to make.

Furthermore, what happened is also positive for the foreign commercial banks placing money in Romania,” Radu Gratian Ghetea, first vice-president of Alpha Bank Romania and chairman of the Romanian Association of Banks (ARB), said.

Dan Pascariu, chairman of Bank Austria Creditanstalt Romania says, “this is a positive signal due to the improvement of certain economic indicators, which the upgrade in the country rating verifies.

At the same time, I think this also shows Romania stirs more interest, but it signals the Romanian authorities to proceed with reforms to live up to the expectations, as well.”