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Slovenia Plans Dollar Bond Sale as Borrowing Costs Ease

Slovenia will probably sell more dollar-denominated benchmark bonds to repay maturing debt as yields fall, finance the budget and recapitalize the banking industry, Deputy Finance Minister Dejan Krusec said.

The euro-region nation, rated Baa2 at Moody’s Investors Service and A at Standard & Poor’s, will probably sell as much as 3 billion euros ($4 billion) of debt this year, Krusec told reporters in Vienna today. It will be “easier” to follow up with a sale in dollars after the country sold $2.25 billion of bonds in October, he said.

One benchmark issue in dollars and one in euros, “that is one scenario,” as U.S. investors are “very keen and spreads have tightened,” Krusec said while attending a Euromoney financial conference in the Austrian capital. “Investors are focusing on how we proceed with reforms and our parliament and the government are operational at the moment.”

Slovenia, which adopted the euro six years ago, is facing the prospect of an early vote that may derail efforts to overhaul the economy after the anti-graft agency found Prime Minister Janez Jansa failed to properly account for his assets, prompting his coalition partners to seek his resignation.

“Timing for the bond sale should be as soon as possible,” Timothy Ash, chief emerging-markets economist at Standard Bank Plc in London, said in a note to clients today. “The problem they face is the on-going political crisis surrounding Jansa with a real threat of early elections, and then no government perhaps till June. If this happens then it might be more challenging to put a deal to bed.”

Consolidation Bank

The government passed legislation on the creation of a so-called bad bank that is meant to clean up balance sheets as lenders struggle with risky loans. The plan foresees an exchange of bad credits for government-backed bonds of as much as 4 billion euros. Setting up a sovereign-wealth fund is meant to help the sale of state assets. Lawmakers also adopted changes to the pension system to ease the burden on public finances.

Last year, Slovenia sold $2.25 billion of 10-year notes at a yield of 5.7 percent on increased demand from U.S. investors. After trade unions and opposition leaders threatened the overhaul measures with referendums, yields jumped Nov. 15 to a record-high 5.78 percent.

The yield on the bonds rose 10 basis points today to 4.753 percent at 12:15 p.m. in Ljubljana, according to data compiled by Bloomberg. Slovenia’s borrowing costs eased after the Constitutional Court last month prevented plebiscites on the bad bank and the wealth fund.

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