By ervin lisaku
TIRANA, Oct 28 – Government on Thursday announced the successful sale of Albania’s first ever Euro bonds, worth 300 million euros at an interest rate of 7.5 percent, one percent less than the Parliament’s authorization.
The money will mainly be used to pay off a costly syndicate loan taken last year to fund the Durres-Kukes highway. Speaking at a press conference, Finance Minister Ridvan Bode did not hide the enthusiasm of the good news, saying that “from this moment Albania is part of the global capital markets and of the most reliable transactions the global economies have nowadays.”
“The issuing of the Euro bonds at this amount and at this interest rate is an undisputable success that confirms the reliability of the government, of the Albanian economy and of the courageous reforms the government has undertaken, and the undeniable success of our macro-economic policies.”
The Albanian government will save around 1 billion leks (7.1 million euros) from the successful emission of the Euro bonds to pay off the costly syndicate loan and finance foreign currency operations, according to Bode.
“This means that we are issuing today in the domestic market some 100 million euros as part of improving the balance of payment and lowering pressures over the appreciation of the euro and depreciation of lek,” added Bode.
Earlier this week, Albania announced it was officially entering international markets to issue its first ever Eurobond in an effort to raise up to 400 million euros to pay off the costly Durres-Kukes loan. The move came as international financial markets stabilized and after some changes were recently approved by majority members of Parliament to the government deal with Deutsche Bank AG and JPMorgan Chase & Co. which are managing the Eurobond sale.
The Finance Ministry said it was optimistic the Eurobond auction would be successfully concluded within this week, and that its goal was to emit less than the 400 million authorization, considering the structure of the debt portfolio and the eventual interest rate of the Eurobond.
Reacting to claims by the opposition and skeptics, the ministry stressed that no money from the Eurobond will be used to finance this year’s budget deficit.
Last July, the Democratic-Party led coalition cut the 2010 budget by 39 billion lek (around 380 million dollars) in an effort to lower budget deficit to 3.1 percent and keep public debt at 59.5 percent by the end of this year. The 2010 budget foresees 333.6 billion lek (3.3 billion dollars) in revenues and 371.7 billion lek in expenditure cutting deficit to 38 billion lek, down from 49.7 billion in the previously approved budget.
The majority of money raised from the Eurobond will go to prematurely pay off a costly syndicate loan government took in May 2009 while the remaining amount will be used to replace short-term lending from the domestic market.
7.5 % guidance
Albania has set price guidance on its five-year debut bond of 300-400 million euros at 7.5 percent, a lead manager of the deal told Reuters on Tuesday.
The bond, rated ‘B1’ by Moody’s and ‘B+’ by Standard & Poor’s, is arranged by Deutsche Bank and JPMorgan.
The deal had been put off from April after the Greek debt crisis rattled markets.
Eurobond efforts
Last week, government changed its mind about abandoning Albania’s Eurobond issue this year, announcing that it could emit the country’s first ever 400 million euro-denominated bond by the end of this month.
The changes to the deal with the Eurobond managers were aimed at accelerating the issue after international financial markets, especially those in Greece, recently stabilized.
Opposition Socialist Party lawmakers have warned the Eurobond, postponed since April 2010, is being issued at this moment to be used for next year’s local elections.
This is Albania’s several attempt in a row to emit Eurobonds after an effort in early 2009 was abandoned due to the global financial crisis, forcing the Ministry of Finance to opt for a costly syndicated loan. The Ministry selected two international banks in March 2009 from which it borrowed 250 million euros. The loan was intended to finance the Rreshen-Kalimash highway which links Albania with Kosovo.
Government had planned to raise as much as 400 million euros ($532 million) of bonds in a debut international offering postponed by two years because of the global financial crisis. The Finance Ministry will use almost 200 million euros to pre-pay a syndicated loan, according to a statement. The bonds are to mature in 3 to 5 years with an interest rate of up to 7.5%.
Last July, the Albania Ministry of Finance managed to get 25 million euros in nine-month treasury bills from local banks, after an attempt to issue Eurobonds in the international market failed in May.
Officials from the Ministry of Finance said that the nine-month maturity bills were bought by local banks with an average interest rate of 5.8 per cent.
