TIRANA, May 1lbania said it’s pushing on with its first sale of Eurobonds even after the biggest surge in emerging-market borrowing costs in a year on Greece’s downgrade caused the Czech government to abandon its borrowing plan.
The government is talking to investors “today and maybe next week,” Deputy Finance Minister Nezir Haldeda said in an interview with Bloomberg BusinessWeek. “We don’t believe Greece will have an impact on the deal.”
Albania, where remittances from abroad account for about a sixth of the economy, has the same Standard & Poor’s B+ rating as Belarus, Nigeria and Senegal. A yield of 7 percent would be “a good starting point” for Albania to offer investors, although it may also need to include “a liquidity premium,” said Martin Marinov of Raiffeisen Capital Management in Vienna and who met with Albanian officials last week to discuss the bond offering. “They left a very good impression,” said Marinov, who is considering buying the securities.
Albania’s government wants to sell between 300 million euros ($398 million) and 400 million euros of five-year notes after delaying the sale by two years because of the global financial crisis. The bonds were to be issued by the end of April, but the move was delayed with government taking a more precautious approach in the face of Greece’s escalating debt woes. Deutsche Bank AG and JPMorgan Chase & Co. are managing the sale and began meetings with European investors on April 26, according to a banker involved in the sale.
“We are watching the market carefully,” said Haldeda, declining to say when the sale will take place.
Borrowing costs have retreated to levels not seen since 2007 as the global economic recovery spurs demand for riskier, emerging-market assets. The extra yield investors demand to own developing-nation debt over U.S. Treasuries fell to 2.309 percentage points on April 15, the lowest since December 2007 and down from more than 8.655 percentage points in October 2008, according to JPMorgan Chase & Co.’s EMBI+ Index.
The surge in borrowing costs is prompting all Western Balkan countries to delay their tapping in the global bond market.
Montenegro, which had hoped to issue 200 million euro in its debut Eurobond as early as in May, is keeping silent on its plans.
Croatia, set to launch an extensive economic reform programme with a view to joining the European Union around 2012, said it still plans to tap global debt markets in the next two months but will monitor Greece before deciding on timing.
Macdeonia plans to issue a euro bond this year for between 175 and 225 million euros to refinance its foreign debt. The country has not yet revealed firm plans but said the issue could take place around mid-year.
In January 2008 Albania planned its first foreign-currency bond sale in May of that year. The sale was halted as emerging-market borrowing costs jumped more than threefold from January to October 2008. Sales of developing-nation debt plunged as credit markets froze following the collapse of Lehman Brothers Holdings Inc.
The Finance Ministry will use almost 200 million euros to pre-pay a syndicated loan, according to a statement on Jan. 18. Albania received a 95 million-euro three-year loan last May and has $225 million of outstanding restructured bonds due 2025, Bloomberg data show. The yield on the restructured bonds is 6.16 percent, according to Standard Bank Group Ltd. prices.
Albania’s economic growth is forecast to accelerate to 3.2 percent in 2011, from 2.3 percent expansion this year, according to a report from the International Monetary Fund this month.
