Romania has another bond issue in store

Romania is planning to launch a new bond issue worth between 250-300 million euros by midyear, Cristian Popa, vice-governor of the National Bank of Romania, (NBR) was quoted as saying by international press agencies. The new issue of eurobonds will mature between seven and ten years.

Romanian authorities are trying to obtain a longer maturity term as compared to the issues launched at the end of last year and the beginning of 2001.

“We intend to launch longer-maturing bonds and attract more investors, mainly institutional investors,” Popa told a seminar with the British investors. He also attended the annual meeting of the European Bank for Reconstruction and Development (EBRD).

Romania needs foreign sources to finance the budgetary deficit targeted to stand at 3.7% of GDP this year. Although lingering uncertainty is upping the price Romania must pay when it approaches foreign capital markets, external credits are likely to finance domestic deficit for lower costs than loans derived from the domestic market.

Last November, Romania entered again the foreign private capital markets by issuing bonds worth 150 million euros, maturing in five years, with 11.5% annual interest rate.

The issue was managed by ING Barings and Schroeder Salomon Smith Barney. The bond issue launched in March was managed by Deutsche Bank and JP Morgan and its yearly interest rate stood at 11.25%.

According to Popa, for the launch of the new Eurobond issue, the Government will choose between eight investment banks, of which four are European and four are American. Merryl Lynch, Deutsche Bank and JP Morgan have already displayed interest in managing the next bond issue.

NBR representative said the endorsement of this year’s budget has delayed the new bond issue so far. According to 2001 budget, economic growth will stand at 4.1%, against 1.6% last year, while the inflation rate will drop to 25%, against 40.7% last year.

Rating agency Standard & Poor’s in March upgraded Romania’s outlook from stable to positive. In his turn, Romanian President Ion Iliescu, also present in London, said that Romania “is quite likely” to conclude a new agreement with the IMF over the next two months and specified that negotiations for a new stand-by agreement were quite advanced.

Authorities stated that negotiations with the IMF would continue in May. The last round of negotiations, mainly aimed at the budget draft, failed due to the two parties’ disagreement regarding the salary and arrears policy.