1 bln Eurobond yields 4.25%, 3rd bond is­sue in just over a year

Financial Mirror (Cyprus) - - FRONT PAGE -

Cyprus raised EUR 1 bln from the 10-year eurobond (EMTN) is­sued on Tues­day with a yield of 4.25%, the third at­tempt in the bond mar­kets in a year, prompt­ing Fi­nance Min­is­ter Haris Ge­or­giades to de­clare that Cyprus’ cred­it­wor­thi­ness has been re­stored.

The an­nounce­ment con­firms re­ports that the gov­ern­ment would re­sort to the mar­kets be­fore the end of the year for a bond is­sue of EUR 1 bln to 1.5 bln. It also fol­lows the lat­est up­grade of the sov­er­eign rat­ing by Fitch last Fri­day, but still three notches away from ex­it­ing the ‘junk’ sta­tus.

“It’s done. Suc­cess­ful mar­ket is­suance of new 10-yr bond, 1bln at 4.25%, low­est ever pric­ing for a 10-yr bond for Cyprus”, Ge­or­giades posted on his twit­ter ac­count.

Speak­ing to re­porters on the side­lines of an event mark­ing the 20th an­niver­sary of RCB in Cyprus, Ge­or­giades said: “To­day we had a suc­cess­ful 10-year bond is­suance for the Re­pub­lic of Cyprus.”

He said that 450 mln from the is­sue will be used to ex­change bonds ma­tur­ing in the pe­riod 2019-2020, while the re­main­ing 550 mln will en­hance the state cash re­serves and will help the man­age­ment of pub­lic debt for the next pe­riod, af­ter Cyprus ex­its the financial sup­port pro­gramme, prob­a­bly by March 2016.

The ma­tur­ing bonds are Eu­robonds at 4.75%, Notes due 2019 at 4.625%, Notes due 2020 at 6.500% and Notes due May 2020.

“What I want to em­pha­sise is that the cred­it­wor­thi­ness the Re­pub­lic of Cyprus has been ef­fec­tively re­stored”, he said, adding that he didn’t use the world “fi­nally” be­cause in the econ­omy noth­ing is fi­nal if not sup­ported by a co­her­ent and cred­i­ble pol­icy. He added that the gov­ern­ment will con­tinue the pol­icy fol­lowed over the past two years that has helped restor­ing the cred­i­bil­ity of the coun­try’s econ­omy.

This is the first time since the eco­nomic cri­sis that Cyprus has bor­rowed from the pri­mary mar­ket through the sale of 10-year EMTN. The Min­istry had also an­nounced an in­vi­ta­tion to hold­ers of ex­ist­ing eu­robonds to ex­change them with the new is­sue of the Re­pub­lic.

Mean­while, Pres­i­dent Ni­cos Anas­tasi­ades con­grat­u­lated the Fi­nance Min­is­ter for the suc­cess­ful 10-year bond is­suance, not­ing that af­ter al­most four years of con­trac­tion, the Cypriot econ­omy is re­turn­ing to pos­i­tive eco­nomic growth.

In his speech at the RCB Bank event held at the Pres­i­den­tial Palace, Anas­tasi­ades said that the Cypriot econ­omy “is emerg­ing out of its most chal­leng­ing pe­riod to date. The last two years are a prime ex­am­ple of what can be achieved with vi­sion, de­tailed plan­ning and pru­dence. Hard work and the com­mon ef­fort of the pub­lic and the pri­vate sec­tor can turn an econ­omy in dis­tress to­wards sta­bil­ity and pros­per­ity.”

He noted that “af­ter al­most four years of con­trac­tion, we are wit­ness­ing a re­turn to pos­i­tive eco­nomic growth from the be­gin­ning of this year, a growth that is pro­jected to be main­tained. The re­sults are al­ready vis­i­ble. Last week, Fitch Rat­ings up­graded Cyprus’ econ­omy by two notches, with a pos­i­tive out­look, point­ing out the pos­i­tive fis­cal per­for­mance and the re­turn to growth”.

“We were suc­cess­ful in en­ter­ing the credit mar­kets to­day and I con­grat­u­late the Min­is­ter of Fi­nance”, he added.

He also said that “sub­stan­tial re­sults have been achieved in the bank­ing sec­tor as well.

The banks have been re­struc­tured and re­cap­i­talised and are re­fo­cus­ing their op­er­a­tions with a pru­dent risk-based ap­proach to lend­ing. To­day, how­ever, con­fi­dence and sta­bil­ity have been re­stored and all re­stric­tions and cap­i­tal con­trols im­posed in March 2013 have been abol­ished ear­lier than ex­pected”.

“Ob­vi­ously the bank­ing sec­tor has still chal­lenges to face: the large num­ber of non­per­form­ing loans and con­se­quently the abil­ity of banks to sup­ply new credit to the econ­omy. To this end, the im­proved le­gal frame­work on fore­clo­sures and in­sol­vency is now in force, and it is in­deed a crit­i­cal step to­wards tack­ling the high level of non­per­form­ing loans”, he added.

The Pres­i­dent stressed that “with a re­spon­si­ble fis­cal pol­icy vis­i­ble through the per­for­mance of the pub­lic fi­nances, with em­pha­sis on in­vest­ments, cou­pled with the tar­geted struc­tural re­forms that we are pro­mot­ing, we are con­fi­dent that the econ­omy will be on solid ground in the medium and long term”.

“Such poli­cies, to name a few, in­volve the fos­ter­ing of the financial sec­tor and the at­trac­tion of strate­gic part­ners/in­vestors in the telecom­mu­ni­ca­tions and ports in­dus­tries, the main­tain­ing of a sta­ble tax frame­work with added in­cen­tives for in­vest­ments and the care for more vul­ner­a­ble groups”, he con­cluded.

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