Albania to select lead managers for new €500 mln Eurobond

Tirana Times
By Tirana Times July 3, 2018 16:29

Albania to select lead managers for new €500 mln Eurobond

Story Highlights

  • Albania’s previous two Eurobonds were managed by Germany’s Deutsche Bank and U.S.-based JP Morgan Chase who acted as joint lead managers

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TIRANA, July 3 – Albania has launched a call for joint lead managers that will help the country’s government raise up to €500 million in international capital markets in a new Eurobond scheduled in the next few months.

In a request for proposals, the government says it intends to issue in 2018 Euro-denominated bonds of up to €500 million with a maturity of five to ten years and buy back a fraction of the existing €450 million Eurobond maturing by 2020.

The country’s finance ministry says the Eurobond and buyback is aimed at covering the government’s financing needs and managing proactively Albania’s public debt profile.

Public debt, currently at about 70 percent of the GDP and at a high level for Albania’s stage of development, is considered one of the key threats to Albania’s macro-economic stability, with its high servicing costs holding back much-needed public investment in key infrastructure, education and health sectors.

The government says the operation is also intended to extend the average maturity of Albania’s liabilities at a reasonable cost, pursue the diversification of investor base and anticipate future financing needs.

Joint lead managers have been asked to submit technical and financial proposals with the finance ministry by July 10.

The selected winners will be responsible for ensuring the “Eurobond issuance and a liability management transaction on the Eurobond maturing in 2020, committing to provide professional and impartial advice and preserve at all times and in all circumstance, the interests of the Republic of Albania.”

Albania is also selecting a legal consultant that will provide authorities assistance in the Eurobond issuance process, including negotiating terms with the lead managers.

Prime Minister Edi Rama says what the markets hint is very encouraging.

“We are preparing for another Eurobond issue. If you look at what markets hint, it’s very encouraging. But this is a whole process that cannot happen in one single day,” Rama recently said.

The  current market conditions seems favorable as the European Central Bank continues to keep its key rates at a historic low of zero while Europe’s single currency currently trades at a 10-year low against the Albanian lek, making external debt repayments much cheaper for the Albanian government.

Albania’s previous two Eurobonds were managed by Germany’s Deutsche Bank and U.S.-based JP Morgan Chase who acted as joint lead managers.

Albania intends to bring public debt, currently one of the region’s highest, to 60 percent of the GDP by 2021 hopeful that the economy will grow by 4 percent, but international financial institutions are skeptical such a scenario can be achieved.

The International Monetary Fund has warned the ambitious €1 billion public private partnership project that the Albanian government plans to implement on road, health and education infrastructure in the next four years could hamper efforts to reduce public debt by creating new accumulated unpaid debts to the private sector which if included in the debt stock could take it to 71 percent of the GDP.

The last time Albania addressed international markets was in late 2015 when it managed  to secure €450 million in a five-year Eurobond at a coupon rate of 5.75 percent, down from 7.5 percent in its inaugural €300 million Eurobond in 2010.

U.S.-based Standard and Poor’s and Moody’s, two of the ‘big three’ rating agencies, rate Albania B+ and B1, with a stable outlook

Both S&P’s B+ and Moody’s B1 ratings signify that the issuer or carrier is relatively stable with a moderate chance of default and that investors and policyholders of the rated entity are taking a low to medium risk.

Tirana Times
By Tirana Times July 3, 2018 16:29