Wednesday, September 15, 2010

Romania Is Ready to Sell Medium-Term Notes After Mid-October, Dragoi Says

Romania will be ready to sell its first euro-denominated medium-term notes after mid-October, part of a three-year plan to sell as much as 7 billion euros ($9 billion)of foreign debt, Deputy Finance Minister Bogdan Dragoi said.

“We are still working on getting the documents for the Euro Medium-Term Notes, or EMTN, ready,” Dragoi said in a phone interview in Bucharest today. “We expect the procedures to be finalized by mid-October. From that moment on, we’ll keep a close watch on the market and issue when the time is right.”

Romania is seeking to raise funds on international markets in its second offering this year, following the Czech Republic, which last week sold 2 billion euros of bonds due in 2021 and attracted 5.3 billion euros in bids. Romania wants to make up for its failure to sell leu-denominated treasuries on the domestic market. Poland may sell bonds in euros as early as this month because of “favorable” market conditions, Deputy Finance Minister Dominik Radziwillsaid yesterday.

The government, which turned to the International Monetary Fund and the European Union for a 20 billion-euro bailout last year, may raise at least 1 billion euros in euro-denominated bonds from the first sale this year in the EMTN program, former Finance Minister Sebastian Vladescu said on Aug. 26. The Finance Ministry selected Vienna-based Erste Group Bank AG and Paris- based Societe Generale SA to manage the sale.

Romania sold 1 billion euros of five-year bonds paying a 5 percent coupon in March in the country’s biggest debt offering. The government revived the sale, which was canceled in November, to take advantage of renewed investor confidence after Prime Minister Emil Bocpledged austerity measures in the 2010 budget.

Rising Yields

The bonds have dropped since the sale, lifting the yield to 5.793 percentage points today, from 4.91 percentage points when they were sold, Bloomberg data show. The leu rose 0.6 percent to 4.2350 per euro as of 1:21 p.m. in Bucharest trading, and the Bucharest Stock Exchange’s benchmark BET index rose 0.2 percent to 5,177.80.

The European Union’s second-poorest country after Bulgaria is struggling to find buyers for its leu-denominated debt to cover its budget deficit of 6.8 percent of gross domestic product this year, after a July increase in a value-added tax boosted consumer prices. The government has raised only 25.8 billion lei from the sale of Treasury bills and bonds from the domestic market so far in 2010, compared with a planned 36.55 billion lei.

An opposition plan to file a no-confidence motion against the government by year-end prompted investors to demand higher borrowing costs on concern the unpopular austerity measures weakened theruling government majority.

To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net; Andra Timu in Bucharest at atimu@bloomberg.net.

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