Deutsche Bank and ING Barings are the two investment banks fighting to obtain from the Romanian authorities the mandate necessary to launch an eurobond issue on international capital markets but banking sources from London say that the offer made by the German bank is more realistic.
The Government is more likely to choose Deutsche Bank, even if, for Romania, the offer of the German bank is less profitable than the one made by the Dutch bank.
“While ING Barings is trying to convince investors to buy Romanian bonds due in seven or ten years and having a LIBOR interest plus five percentage points (i.e. 11-13%), Deutsche Bank speaks about a similar interest maturing in only three years, which is much more realistic,” the above-quoted sources say.
Moritz Schularitz, manager for Romania of the Emerging Markets Monitor division within Deutsche Bank, told Ziarul Financiar that investors are more interested in a short-term bond issue than in a long-term one. He adds that the German bank will “do its best to obtain a good interest rate for Romania.”
“I believe that the capital market is still reluctant toward Romania, as its image is still influenced by the danger of entering default, the way it almost happened last year. That is why Romania still appears like a vulnerable country to most foreign investors,” Schularitz says.
Even under these circumstances, the Deutsche Bank analyst believes that “a bond issue launched with an 11-13% interest rate per year and a three-year maturity stands good chances of being successful.”
“For this price, Romania might get 300 million euros,” the German bank’s director also says.
On the other hand, ING Barings says that there are enough investors interested in a bond issue maturing in seven years.
The Dutch bank recommends Romanian authorities that the issue should be launched with a discount as to the nominal price. ING should cash in a commission of 1.25 percent, as well as costs related to the launch of eurobonds, which are estimated to stand at 636,000 euros.
Siege Renier, an analyst with Dresdner Bank, told Ziarul Financiar that “Romania will find it very difficult to obtain a favourable interest rate as it is not usually present on capital markets.”
“I think however that what matters the most is presence on the market. Let us not forget that there is no analysis on developing markets making reference to Romania,” Renier says.
Analysts of ABN Amro London think however that it is too early for Romania to issue bonds on the international capital market this autumn, because of the country rating granted by rating agencies.
“Romania should wait at least half a year before launching a new bond issue,” they say.
Their opinion is not however shared by Ian Hardy, an analyst with Morgan Stanley Dean Witter, who thinks that “the economic situation in Romania has considerably improved as compared to the past three years.”
“Figures concerning exports and the foreign currency reserve are encouraging enough and this means a lot for Romania’s image. Moreover, by launching a bond issue, the current Premier seems to want to prove ‘the transfiguration'”, the British analyst stated.
The eurobonds issue to be launched this autumn is Romania’s third bid over the last year to enter the foreign capital market.
Last autumn, the Government planned to issue eurobonds through Deutsche Bank and Merrill Lynch, but plans failed to materialise, because of unfavourable market conditions.
The Executive had originally mandated Credit Suisse First Boston to co-ordinate an eurobonds issue, after it gave up the idea of a private placement due to the 17 percent interest requested by investors at that time.