Romania is bracing for the lowest yield ever obtained for a loan contracted from the foreign capital markets – around 6% annually, in euros.
The four banks mandated to handle the eurobond issue scheduled for this year – Deutsche Bank, UBS Warburg, JP Morgan and Citigroup yesterday announced the launch of the 700 million-euro ($810m) bonds, maturing in seven years.
The price was to be set yesterday, as subscription had not closed yet. The market was pointing to a margin of 250-260 base points above the benchmark rate (3.36%), which would mean a 5.86-5.96% yield. Under the circumstances, the price may reach 99.65-99.90 euros, with a 6% coupon.
According to analysts, the rate could even go below 6%, as investors are willing to pay a liquidity premium since the amount is significant.
“The market appreciates the seven-year maturity, which completes Romania’s yield curb. The investors weigh the regularity of market presence and the yield curb,” an analyst comments.
The new eurobond issue maturing in 2010 comes between the issue that will reach maturity in 2008 (now with an average yield of 5.55%) and last year’s issue maturing in 2012, quoted at 6.14%. Analysts say the yield of the new bonds may keep adjusting, down to less than 5.95%.
The National Bank of Romania vice-governor Cristian Popa says he expects the issue to be significantly subscribed. “A moderate growth of the initial amount may occur, as Romania has often been characterised on the international markets as a prudent state,” Popa says.
Enache Jiru, a state secretary at the Finance Ministry in charge with foreign public finance, would not comment by press time.
Foreign investors deemed Romania’s expectations as cautious, since the positive attitude towards Eastern European countries is no longer as strong as it used to be in the past years. Most analysts agree Romania will make a good deal this year. The bond presentation teleconference was organised on Monday and 38 banks, mostly London-based, attended.
On the other hand, US rating agency Moody’s feels Romania’s investment risk rating will be upgraded only if political stability policies and structural reforms are more thoroughly enforced.
Romania is now two steps behind Bulgaria, which has already joined the group of countries that enjoy a better risk perception on the foreign markets. Romania is one of the EU candidate countries that received the lowest ratings from the three leading international leading agencies – Moody’s, Standard&Poor’s and Fitch. razvan.voican@zf.ro