Serbia’s first-ever Eurobond sale won’t be sidetracked by the growing euro area’s debt crisis and the government will consider selling dollar-denominated bonds, Prime Minister Mirko Cvetkovic said.
Cvetkovic’s Cabinet selected JP Morgan Chase & Co. and Deutsche Bank AG to help it prepare and sell as much as $1 billion by the end of September or October. The government has already tested market appetite with a March 30 sale of three-year dinar-denominated bonds at home, offering investors a 10 percent coupon with yields at 14.08 percent on April 1.
“The process is on track and the road show is planned for September,” said Cvetkovic in an interview in Belgrade today. “I don’t think the Eurobond sale is affected by the crisis and as far as limits on our borrowing costs are concerned, we would not be issuing a Eurobond if we could borrow at a lower cost from commercial banks.”
Serbia needs financing as it reduces its budget deficit and cuts spending to meet demands by the European Union and the International Monetary Fund. Serbia wants to become an official candidate at the end of the year to join the world’s largest trading bloc.
The government has stepped up borrowing this year in the local market, encouraged by growing investor interest in yields of more than 10 percent on dinar-denominated debt.
It had to increase debt after it refused to sell a controlling stake in Telekom Srbija AD to Telekom Austria AG as the offer trailed the 1.4 billion-euro ($2 billion) asking price.
(For comments from Cvetkovic on Serbia's budget, click here.)
There is “a lot more appetite” for dollar lending on the market, Cvetkovic said of the sale that is planned to consist of 500 million euros in a foreign currency and up to 200 million euros in dinars.
“According to preliminary analysis, there is also an appetite for dinars and we will manage to issue a dinar-denominated Eurobond,” he said.