Albania hopes to raise up to €500 mln next October in new Eurobond

Tirana Times
By Tirana Times September 21, 2018 12:05

Albania hopes to raise up to €500 mln next October in new Eurobond

By Ervin Lisaku

TIRANA, Sept. 21 – Ruling majority MPs paved the way for Albania’s third Eurobond issue this week and expect the country to raise up to €500 million next October when it taps international markets.

In a parliamentary session on Thursday, ruling Socialist Party MPs authorized the country’s finance minister to raise up to €500 million in a new 5 to 10-year Eurobond that will also cover buying back a fraction of the existing €450 million Eurobond maturing by November 2020.

Thursday’s Parliamentary session was not attended by the opposition which has been boycotting Parliament this month following the summer break, staging parallel meetings in major cities it considers controlled by gangs, and accusing the ruling majority of alleged links to corruption and crime.

The government says the Eurobond and buyback operation will meet financing needs for the next couple of years and could save taxpayers money by reducing refinancing risk in 2020 when borrowing needs are estimated at €700 million.

The ruling majority says the country’s recovering economy amid fiscal consolidation and public debt reduction agenda place Albania at a favourable position on international markets and the operation eases pressure on the local market to boost lending to the private sector, currently sluggish and hampered by declining but still high level of non-performing loans.

The finance ministry says October 2018 is the best timing Albania could issue its Eurobond in order to take advantage of lower interest rates.

The Eurobond law that takes immediate effect due to high expectations for an October issue strips Albania’s upcoming Eurobond holders of all taxes applied in the country in all operations and transactions involving the Eurobond and buyback.

Experts say current market conditions seem 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.

However, Albania’s public debt at about 70 percent of the GDP, considered too high for the country’s current stage of development and posing a key threat to the country’s macro-economic stability, will apparently lead to higher interest rates compared to regional countries with lower and more affordable public debt levels.

Earlier this year, Macedonia borrowed €500 million in a 7-year Eurobond at an interest rate of 2.75 percent while Montenegro raised €500 million at a 3.37 percent rate.

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.

Albania has picked Citi, an American multinational investment bank and financial services corporation, Banca IMI, a subsidiary of Italy’s Intesa Sanpaolo specialized in investment banking and capital markets and French lender Societe Generale as joint lead managers for Albania’s third Eurobond.

US-based law firm Dechert LLP has been reselected as a legal consultant after advising the Albanian government in the 2015 Eurobond issue.

Legal changes approved in 2015 allow the finance minister to borrow within the limits set by the budget without prior approval by Parliament in a bid to accelerate borrowing procedures in order to secure lower interest rates.

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 September 21, 2018 12:05