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