Wednesday, February 4, 2009

EBRD Sells Lei Bonds to Help Boost Capital Market

By Irina Savu

Feb. 3 (Bloomberg) -- The European Bank for Reconstruction and Development sold 115 million lei ($34 million) in 10-year bonds to help develop Romania’s capital markets.

The sale is the EBRD’s first ever denominated in the Romanian currency and targets domestic and international investors through a dual listing, the London-based bank said in an e-mailed statement today. The bonds carry a coupon of 11.25 percent and were lead managed by Societe Generale SA, the EBRD said. The bonds mature on Feb. 5, 2019.

“The further development of a domestic capital market will have long-term benefits for the Romanian economy,” said Claudia Pendred, EBRD Director for Romania, according to the statement.

About two-thirds of all private borrowing in the Balkan state is denominated in euro, according to the central bank in Bucharest.

“This issue reflects the importance of developing a domestic capital market in local currency,” EBRD Vice President Finance Manfred Schepers said in the statement. “The need for deep domestic markets has been highlighted by the current crisis where an over-reliance on foreign currency debt has exacerbated instability.”

The EBRD plans to sell the bonds on the Bucharest Stock Exchange and the London Stock Exchange, according to the statement. The notes are expected to get top ratings of Aaa from Moody’s Investors Service and AAA from Standard & Poor’s and Fitch Ratings, which correspond to the EBRD rating, the bank said.

Romanian Investments

The EBRD, which seeks to boost growth in central and Eastern Europe and the former Soviet Union, has so far invested about 3.8 billion euros in 249 projects in Romania and helped bring in another 7.2 billion euros ($9.34 billion) in external funding to the Eastern European country, according to bank data.

Romania’s three-year 8.5 percent euro-denominated government bonds due 2012 were unchanged today, with the yield at 8.45 percent, the lowest since October. The 5.75 percent bonds maturing 2010 fell, pushing the yield 1 basis point higher to 8.04 percent. The eastern European nation has $10.8 billion in government debt, according to Bloomberg data.

By comparison, Russia’s 10-year dollar-denominated government bond has an 8.25 percent coupon and its yield is currently at 5.14 percent, the lowest since Jan. 20. In Poland, the 10-year note has a 5.5 percent coupon rate and yields 5.72 percent, while in the Czech Republic, the 10-year bond has a coupon rate of 4.6 percent, and yielded 4.40 percent today.

Financial Crisis

East Europe’s economies are being battered by the global financial crisis, which thrust the euro region into its first recession since the common currency’s introduction, cutting off export demand.

The BET Index, the benchmark of the Bucharest Stock Exchange, has declined 69 percent in the past year amid concern over the global economic slowdown, as investors flee riskier emerging-market stocks, bonds and currencies.

The BET dropped more than 27 percent this year following worldwide stock losses. It’s the fifth-worst performer this year among 89 indexes tracked by Bloomberg.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

No comments: