Romania to launch another bond issue

The Government is planning to launch on the international capital markets a new bond issue worth 300-400 million euros and maturing in seven years. The issue will take place no later than May this year, Finance minister Mihai Tanasescu said on Tuesday. “Romania will approach foreign capital markets for the second time this year,” Tanasescu said. “The current circumstances on the capital markets are not very encouraging for us, especially after what happened with Argentina,” the Romanian official added. Standard&Poor’s has recently downgraded Argentina’s rating.

The Finance minister failed to specify whether any particular investment bank had been appointed to manage the issue. Government sources claimed that there were more than five bids. Deutsche Bank, Merrill Lynch, ING Barings, ABN Amro Rotschild and JP Morgan are interested to collaborate with the Finance Ministry on this issue.

Romanian officials are optimistic about the decision to expand the bonds’ maturity from 5 years to 7 years, especially considering the success of the former Eurobond issue.

Romania borrowed 150 million euros for an 11.5% interest rate in January this year, when it launched the Eurobond issue maturing in 5 years.

However, Romania, as well as Russia, is still borrowing at one of the highest interest rates on the capital market. By contrast, Slovenia attracted 400 million euros with 6% annual interest rate.

Tanasescu says that the entire amount derived from private or institutional investors will aim to finance the budgetary deficit this year. He hopes that Romania will borrow between 700 and 800 million euros from the foreign capital markets this year.

According to the 2001 budget draft, the Finance Ministry will finance 65% of the budgetary deficit estimated to stand at 3.7%.