TIRANA, Dec. 6 – Albania’s debut sale of 300 million euros of five-year bonds at a yield of 7.5 percent at the end of last October lowered the country’s external debt cost by 20 percent at the end of November, the Finance Ministry says.
Xhentil Demiraj, the ministry’s public debt director, says the payment of the costly 200 million euro syndicate loan through the Eurobond has brought positive effects lowering the debt cost by 10 million dollars.
The external debt accounts for 40 percent of the country’s total debt.
The final successful issue was 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. 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.
Eurobond’s investor appeal
The country’s recent strong economic performance helped explain why there was keen investor interest in the maiden Eurobond that Albania launched at the end of October,
Prime Minister Berisha told Euromoney magazine recently. The Euro 300 million, five-year issue via Deutsche Bank and JPMorgan attracted widespread distribution, with 80 investors from 25 countries.
The proceeds of the issue, which was priced to yield 7.625% at launch, have been earmarked to pay off a syndicated loan with a margin of 11% taken out at the height of the global economic crisis in 2009. That loan was used to finance part of the Albania-Kosovo highway, one of a number of landmark infrastructure projects designed to boost Albania’s economic fortunes.
The refinancing of the loan will save Albania roughly Euro 7 million. Berisha says that the ΅urobond offered investors the chance to buy into “a very dynamic economy in a time of crisis”. He says that as well as attracting portfolio investment Albania is committed to encouraging longer-term strategic investment.
“Albania is probably the lowest-cost country in Europe,” he says, noting that the tax reforms his government introduced in 2007 have had a dramatic effect.
Berisha cut corporate tax from 25% to 10%, personal income tax from 23% to 10% and social security contributions from 32% to 15%. He says that encouraging private-sector development has paid dividends for the government, with tax and customs revenues reaching Lek 104 billion ($1 billion) in 2009, compared with Lek 50 billion in 2004.
Eurobonds Again Next Year
Albania plans to sell bonds in euros next year after last month’s debut sale as it seeks to repay maturing debt and raise funds to build roads, bridges and railways, Prime Minister Sali Berisha told Bloomberg last weekend.
The government will seek to raise 300 million euros ($409 million) to 500 million euros, Berisha, 66, said yesterday in a phone interview from the capital, Tirana.
“Next year we are going to go to the euro markets because we would like our banks to have space to finance the private sector,” he said. “We are not in a hurry. We will go back to the market at the most optimal time.”
