One of the biggest businesses on the Bucharest market, the eurobond issue by the City Hall worth 120 million euros, has already caused discontent among competitors, who claim they submitted better bids than the winners of the contest, the consortium made up by the banks ABN Amro and JP Morgan.
In response, Cristina Parvulescu, executive director of the foreign loans department of the City Hall, said that the final score of each bidder was based on a number of criteria which, besides financial offers and international expertise, included the preparation of the necessary documentation.
Sources involved in the running of the tender say the best financial offer came from Credit Suisse First Boston, followed by Deutsche Bank.
“We do not understand the tender commission’s decision because the banks were announced as winners based on greater expertise compared with other participants,” said an official from one of the banks challenging the decision.
According to documents that have reached Ziarul Financiar, Deutsche Bank offered a 0.25% fee for a 5-year issue, 0.30% for a 7-year issue and 0.375% fee for a 10-year issue, which is less than bid by the winning consortium of 0.35%, 0.40% and 0.45% for 5,7 and 10 years respectively.
“The financial offer was but one of the criteria considered when selecting the winner of the tender, with the other criteria also being included in the final score. As regards international expertise, for consortiums the commission took into account the combined expertise of all consortium members, which therefore scored higher than for a single bidder,” Cristina Parvulescu explains.
“Furthermore, certain financial bids included all the costs, such as the retainers of the law firms hired,” she added.
The winning consortium will get a fee ranging between 85,000 and 120,000 euros, depending on the duration of the issue – 5, 7 or 10 years – as well as an interest payment, which cannot exceed 5%.
“The fee includes expenses such as the floatation, meetings with investors, the road show and others,” Parvulescu said.
Romania’s latest eurobond issue, released two years ago, came with a 5.25% interest rate per year.
As arranger for the municipality, the consortium will choose the best time to sell the bonds.
The money raised in this way will be used to fund infrastructure projects like the construction of the Basarab passage, the parking lot at Gara de Nord and the acquisition of trams for newly modernised tram routes.
The City Hall official says the bond issue could be upped to 150 million euros if Bucharest gets a rating upgrade.
Back in May last year, financial ratings agency Standard & Poor’s announced the first rating for the Bucharest municipality of “BB” for long-term debt with a stable rating outlook.
adrian.mirsanu@zf.ro