Bulgaria Signs Schuldschein Loan Accord With Deutsche Bank

Bulgaria signed an agreement with Deutsche Bank AG to raise 360 million euros ($487 million) in so-called Schuldschein loans to service debt and increase its fiscal reserves.

The agreement, which must be ratified by parliament, will enable the cabinet to tap 7-year, 10-year and 15-year credit lines from institutional investors, the Finance Ministry said in an e-mailed statement today from the capital Sofia. Deutsche Bank and Raiffeisen Bank International AG are managing the transaction, the ministry said. Schuldschein loans are promissory notes issued privately under German law.

“The specific terms of the financing will be determined after marketing among investors and preliminary subscriptions, as the practice is with Schuldschein loans,” Yasser El Amin, a finance ministry press officer, said by phone today.

The minority cabinet of Prime Minister Plamen Oresharski revised the budget in August, widening the deficit to 2 percent of gross domestic product from a previous 1.3 percent to cover increased social spending and service debt payments. Oresharski came to power on May 29 after anti-austerity protests forced out former Premier Boyko Borissov’s Gerb party and triggered a snap election.

Yields Fall

The yield on Bulgaria’s euro-denominated bonds due 2017 fell seven basis points to 2.012 percent at 5:30 p.m. in Sofia. The cost of insuring the country’s debt against non-payment for five years using credit-default swaps fell two basis points to 119.35.

Bulgaria’s public debt amounted 17.5 percent of GDP at end August. It is rated Baa2 by Moody’s, on par with Brazil, and BBB by Standard and Poor’s. Bulgaria’s economy is expected to expand 0.5 percent this year and 1.5 percent in 2014, the European Commission said this week.

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