Hungary Eyes Foreign Bond Return as Renminbi Roadshow Set

Updated on
  • Government to join financing push by east European countries
  • Hungary may offer $1.1 billion of international debt in 2016

Hungary plans to sell bonds on international markets for the first time in almost two years by the end of February, part of an early push by eastern European nations to lock in financing for 2016, Economy Minister Mihaly Varga said. The government announced it has lined up investor meetings for a potential renminbi issue.

Hungary will offer foreign-currency debt in January or February, Varga said in an interview in Budapest on Wednesday. The government mandated Bank of China Ltd. to organize a non-deal roadshow with a view to sell renminbi bonds, Hungary’s Debt Management Agency said by e-mail on Thursday.

“Because of maturities we obviously need to make a market move in January or February,” Varga said. “Hungary has opened a very important symbolic door in China. We’d like to test this market and to keep building this trust it in the future.”

Joining Peers

Hungary, which has 1.52 trillion forint ($5.2 billion) of foreign-currency debt coming due this year, is joining regional peers looking to sell on international debt markets. Poland and Romania have announced plans to raise foreign-currency debt in the first quarter and Bulgaria is also slated to tap the market. The sales, if they materialize, may help a shrinking Eurobond market. JPMorgan Chase & Co., the third-largest organizer of emerging-market bonds in euros and dollars last year, forecast last month that governments and companies in developing nations may cut issuance by 9 percent in 2016.

“The custom in central and eastern Europe is to finance ourselves as rapidly as possible early in the year so there’s peace and quiet afterwards,” Varga said. The bulk of foreign-currency financing this year will be in dollars or euros, he said. While the government remains committed to raise the share of forint financing, it needs to “periodically test the markets where we’ve previously issued.”

Hungary last tapped international markets in March 2014, when it raised $3 billion. The nation’s dollar Eurobonds handed investors a 5.6 percent return last year, the best performance among non-euro peers in the European Union’s eastern region, according to the Bloomberg USD Emerging Market Sovereign Bond Index. The country currently has no dollar or euro offering in the pipeline, Eva Szalkai, a spokeswoman for the debt agency, said by phone.

Hungary’s Plan

The government in Budapest this year may sell as much as 312 billion forint, or $1.1 billion, in international debt denominated in dollars, euros or yuan, Gyorgy Barcza, the head of Hungary’s Debt Management Agency, said on Dec. 16. The Eurobond target may be cut if forint- or retail-bond sales exceed plans, he said.

Elsewhere in the region, Romania plans to raise about 3 billion euros ($3.2 billion) this year on international markets after officials held a roadshow in the U.S last month. Poland may sell as much as 25 billion zloty ($6.2 billion) in foreign issues in the first three months, depending on market conditions. Bulgaria’s financing plan calls for selling up to 3.9 billion lev ($2.1 billion) in foreign-currency debt this year.

Cutting FX Debt

Hungary has aimed to gradually cut the share of non-forint debt, which fell to an estimated 32 percent by the end of last year from 50 percent four years ago. This year’s maturities -- more than double the 743 billion forint in obligations the eastern European nation paid off last year using proceeds from domestic debt sales -- include four Eurobonds as well as the last installment of a 2008 emergency loan from the International Monetary Fund and the EU.

For the potential renminbi issue, investor meetings are planned in Singapore on Jan. 11 and Hong Kong on Jan. 12 ahead of a potential renminbi sale, according to a person familiar with the offering, who was not authorized to speak publicly and asked not to be identified.

— With assistance by Neha D'Silva, Gabriella Lovas, and Irina Vilcu

(Updates with renminbi roadshow in first paragraph. An earlier version of this story was corrected to remove reference to bond denomination in second paragraph.)
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