TIRANA, Aug. 2 – American, Italian and French financial institutions have been selected to manage Albania’s upcoming Eurobond in the next few months when the Albanian government plans to raise up to €500 million in international capital markets.
The finance ministry says it 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.
Albania’s previous two Eurobonds were managed by Germany’s Deutsche Bank and U.S.-based JP Morgan Chase.
The government says it intends to issue by the end of this year 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 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.
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.
In January 2018, Macedonia, whose public debt is at about 47 percent of its GDP, borrowed €500 million in a 7-year Eurobond at an interest rate of 2.75 percent, in the lowest ever rate while tapping international markets for a sixth time. The low rates came amid abundant supply, reflecting investor confidence in the neghbouring country’s economy which is projected to grow by about 3 percent in the next couple of years after GDP fell to zero in 2017 as Macedonia struggled with a political crisis.
Montenegro, whose public debt stands at about 60 percent of the GDP, issued its €500 million Eurobond with a 7-year maturity at an interest rate of 3.37 percent last April.
Albania intends to bring public debt, currently 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.
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.
