Bulgaria plans to sell Eurobonds at the end of May or in June to raise funds to repay about 835 million euros in 11-year Eurobonds maturing on Jan. 15, 2013.
“The sale can be arranged in a matter of several weeks,” Finance Minister Simeon Djankov said in an interview with Bulgarian National Television in Sofia today. “The Cabinet must issue a mandate first, then we need some three to four weeks to prepare the documents, so it can take place by the end of May or the beginning of June.”
This will be the first time in 11 years that Bulgaria will tap international markets. The European Union’s poorest country in terms of per-capita economic output has the second-lowest public debt in the 27-nation bloc after Estonia, at 14.3 percent of gross domestic product at the end of January.
“We had to wait until the Greek debt issues are cleared, because the crisis has weighed on the EU and increased interest rates for neighboring countries like Bulgaria,” Djankov said. “If we were to sell the bonds a month ago, we would’ve paid 7.5 percent interest. If we sell now, it’ll be 5.5 percent. The time to do it is between now and July.”
Djankov did not elaborate on the amount to be sold, saying the new issue will “partly fund” the debt redemption in January. Bulgaria’s sovereign debt is rated BBB by Standard & Poor (SPY), level with Russia and Lithuania, and Baa2 by Moody’s, level with Brazil.
Cash in the Bank
The move is a “case of getting cash in the bank while global markets remain liquid,” said Tim Ash, head of emerging- market research at the Royal Bank of Scotland Group Plc in London, in an e-mailed note. “Bulgaria’s key strength remains the fact that it has a huge fiscal reserve and one of the best public sector debt to GDP ratios in the EU.”
Another part of the debt-repayment will come from the so- called Silver Fund, in which the government collects proceeds from state-asset sales, which from 2017 will be used to pay pensions, Djankov said.
The ministry has proposed investing 30 percent of the fund’s assets, which total about 2 billion lev ($1.35 billion), in Bulgarian government securities and use the return on the investment to repay the January debt, he said.
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