Macedonia Delays Bond as Opposition Party Questions Its Legality

  • Opposition party says Eurobond violates "several laws"
  • Government targeting 650 million euros of debt in 2016

The Republic of Macedonia has postponed a Eurobond sale after the country’s largest opposition party said the government was not authorized to borrow until it forms a new cabinet.

The Social Democratic Union of Macedonia, or SDSM, said yesterday the bond transaction will ‘violate several laws.’ The statement appeared on the party’s website after the government began marketing a seven-year Eurobond issue amounting to at least 500 million euros ($554 million) on Thursday with initial guidance for the yield on the notes of about 5.5 percent. The finance ministry confirmed it put the deal on hold in a statement on its website Friday.

“It’s purely a political issue, they should be back in the market soon,” said Jetro Siekkinen, a money manager who helps oversee $1.7 billion in emerging-market debt at Aktia Asset Management Ltd. in Helsinki and had bid for the bond. “I heard there was good demand so it definitely was not a lack of interest.”

The former Yugoslav republic has been in a political limbo since a general election scheduled for June 5 was delayed indefinitely after opposition parties, including SDSM, threatened to boycott the ballot. The parties are demanding a revision of the country’s electoral roll and guarantees of fair media reporting followed by a national vote in November.

Tapping Investors

Macedonia tapped international capital markets last year, raising 270 million euros in a sale of five-year bonds and was looking to raise 650 million euros more in 2016 to cover two years of budget financing and repay maturing debt, according to the finance ministry.

The yield on the notes due in 2020 fell one basis point on Friday to 4.59 percent, near an all-time low.

For a story about Macedonian bond markets, click here

“All parties involved in the issuance of the Eurobond are obliged to act within a valid legal framework,” the Social Democratic Union of Macedonia party said on its website.

Macedonian Finance Minister Kiril Minoski rejected the opposition party’s claims in a statement, calling them an attempt to “misinform the public.”

“I think they will solve it and come back,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment who helps oversee about $12 billion. “All orders will stay as soft interest valid. An investor call with the Macedonian delegation will be arranged to sort all things out.”

Vladimir Pesevski, Macedonia’s Deputy Prime Minister in charge of economic affairs, told the Channel 5 TV broadcaster that the row is "damaging the reputation of Macedonia." He said "investors and advisers are looking now together into the whole thing because it is necessary to confirm that there are no legal obstacles to issuing the Eurobond.”

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