Third bond issue below € 1.5 bln by year-end
Finance Minister Haris Georgiades said on Tuesday that the government will return to the international markets for the third time in one and a half year and will borrow less than EUR 1.5 bln.
?It won’t be EUR 1.5 bln or more,” he told CyBC radio responding to a Financial Times report according to which the government plans to issue a EUR 1.5 lbn 10-year bond before the end of the year.
“It will be less. We don’t have such needs”, he said, as the has a refinancing need of EUR 1 bln next month, as well as 3 bln in maturing bonds next year.
“The exact amount, the maturity and when we will exactly attempt this issue will be decided later,” he added. “We have announced the selection of four large investment banks who will underwrite a possible new issue.”
The four underwriting banks are Barclays, HSBC, Goldman Sachs and Nomura.
The minister’s comments came after the the European Stability Mechanism board of governors announced the payment of a EUR 500 mln tranche to Cyprus as part of the 10 bln bailout plan.
However, Cyprus has used up only two third of that amount and may considering utilising those funds for other projects, such as finance of development projects, as it has stated its intention to exit the three-year bailout programme by March next year.
Government spokesman Nicos Christodoulides said that “such moves will indicate that the economy’s credibility is restored at international level”
“Confidence has been restored and market access reestablished. Market conditions permitting, we are planning a new bond issuance by the end of the year in line with our annual funding programme, but the exact timing and details have yet to be determined,” Georgiades had told the FT.
Cyprus will be able to borrow at a rate of 3.5%, the newspaper said, with yields on the existing 10-year bond (2021) having dropped from 5.75% in February to 3.69% at present.
In April, the government had sold EUR 1 bln in seven-year bonds, with the yield set at 4.0%, below initial expectations. Last year, it sold EUR 750 mln in five-year debt at a lower than expected rate of 4.85%.
Since then, its credit rating has been upgraded by Standard and Poor’s and its deficit appears to have stabilised at levels much lower than expected.
The reason is the better than expected macroeconomic environment as the ministry estimates that growth will reach 1% this year.
The Ministry hopes that the 10-year bonds will maintain yields significantly below 4%.