Bond issues worth 500m euros, postponed indefinitely

The Romanian companies planning to release eurobond issues worth 500 million euros in late 2002 and early 2003 have postponed them indefinitely due to the high costs involved, preferring to look for financing under better terms.
Transelectrica was the first to postpone a 100 million euro issue, followed by Hidroelectrica and the National Road Administration early this year. The two were planning to release a 120-150 million euro issue and a 200-250 million euro issue, respectively.
All these postponements are bad news to ABN Amro, Morgan Stanley and ING Bank, the investment banks preparing the launch of the Romanian companies’ eurobond issues on the international markets.
“The companies chose not to release bonds, after seeing what happened to CFR Marfa (which borrowed at 10.5% interest with no security from the State, i.e.). As government security was suspended under the agreement with the IMF, this was simply too expensive,” an analyst commented for Ziarul Financiar.
The government security and its market history, however, helped Termoelectrica to recently borrow at half the interest charged to CFR Marfa.
Transelectrica, the national electricity carrier was the first that decided to postpone its 100 million bond issue at the end of last year. This issue, initially scheduled for November and not secured by the State was supposed to be brokered by ABN AMRO and Morgan Stanley.
The company management relies on attracting more advantageous financing from the World Bank (WB) and the European Bank for Reconstruction and Development (EBRD). In general, the funding provided by the international financial institutions is cheaper than raising cash from the capital market.
The World Bank loan may amount to approximately $70 million and start being released in the first half next year.
The second-largest electricity producer on the Romanian market, Hidroelectrica last week announced it might give up releasing the 120-150 million euro bond issue on the international capital market scheduled for early this year and aimed at raising cash for retooling several power producing units. Hidroelectrica had previously received brokerage offers from JP Morgan (US), Triple-A (Austria), Deutsche Bank and UBS-Warburg (Germany).
Finally, it was the National Road Administration’s turn to give up releasing an about 200 million euro bond issue. The cash raised from the issue should have been used for financing the national road primary rehabilitation programme, with the issue supposed to be brokered by ING Bank.