The selection of the two winning banks came after 15 major banks bid to manage the 350 million euro bond.
TIRANA, Feb. 22 – U.S.-based JP Morgan and Germany’s Deutsche Bank were selected to mange Albania’s first ever Eurobond, with Raiffeisen Bank playing a supporting role, Albania’s Finance Ministry said this week.
The selection of the two large international banks came after 15 major banks bid to manage the 350 million euro bond, Deputy Finance Minister Nazir Haldedaj said in a press conference.
The Albanian government aims to get a loan through selling the bond, but also to test the waters for future international bonds.
If conditions offered by investors are favorable, the 350 million euro figure could increase. It has already gone up 50 million euros from when the government first announced it would be issuing the Eurobond late last year.
Albanian officials have said that the overwhelming part of the funds raised by the Eurobond will go to pay off a syndicated loan of 200 million euros which has high interest on it and the rest will be used for financing budget needs.
During the next two months, along with the two winning banks, Albania will make presentations in major financial centers to attract potential investors, while negotiating the interest rate on the bond. Getting a good interest rate is particularly important at a time when the country’s public debt is rapidly increasing, officials said.
J.P. Morgan Chase is one of the oldest financial services firms in the world. With operations in 60 countries, it has $2 trillion in assets. Deutsche Bank is an international bank with operations in 76 countries. It has a large presence in Europe, the Americas, Asia Pacific and the emerging markets.
Albania’s first Eurobond, like all other bonds of this kind, is denominated in a currency not native to the country where it is issued.
Albania’s bond is denominated in euros and will be government by the regulations of the United Kingdom, where most European bonds of this kind are traded, according to the Finance Ministry.
Countries routinely hire large banks to manage their bonds in the international markets.
Albania is turning to selling international bonds as other types of credit have tightened considerably due to the global recession and issuing bonds offers a way to finance public projects at a better rate, according to the government.
“The public debt for 2010 is a challenge, so we are prepared to have Albania enter in the international market to finance the country’s needs for more money at a better cost,” Albanian Finance Minister Ridvan Bode said earlier this year.
Their maturity will be three to five years, according to the Ministry of Finance.
The program is part of the Finance Ministry’s medium-term financing strategy that ends in 2011, and there will likely be other bonds sold, including some using the U.S. dollar if the exchange rates are favorable, officials said.
