Macedonia Resumes Bond Sale Delayed by Political Squabbling

  • Government offers 450 million euros of seven-year bonds
  • Macedonia delayed bond sale last week amid political row

The Republic of Macedonia resumed its first international debt sale this year, halted amid a political row, as record-low rates in western Europe boost demand for riskier assets.

The junk-rated country is offering 450 million euros ($496 million) of seven-year bonds at a final yield guidance of 5.875 percent, according to a person familiar with the deal. While a decline in the government’s existing bonds on Tuesday sent yields higher, borrowing costs have fallen in 2016, driving the rate on five-year notes down 38 basis points to 4.82 percent.

The issuance of the bond, with a 5.625 percent coupon, was conducted “in compliance with all legal regulations and agreed with the Ministry of Justice, legal representatives of the government and legal representatives of the bank consortium” which conducted the sale, the Finance Ministry in Skopje, the capital, said in an e-mailed statement.

“The successful sale of the Eurobond reflects a well-conducted process in an extremely unfavorable and difficult political environment in the country,” it said. “The funds raised from the Eurobond will be used for budget needs in fiscal years 2016 and 2017 and for repayment of maturing debts.”

Macedonia postponed the offering last week after the country’s biggest opposition party said the government wasn’t authorized to borrow until it forms a new cabinet. Elections, intended to help resolve a year-long political standoff, are set for November after being postponed twice this year. Macedonia’s offering would follow other emerging-market sovereigns including Montenegro, Mexico and Qatar selling debt in dollars and euros in record government issuance of Eurobonds this year.

“Macedonia showed even a country with political turmoil can sell a bond and
get demand from investors,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment who helps oversee about $12 billion. “But that comes at the price of lower volume and higher spread.”

The proposed guidance would be the same rate Albania paid to raise 450 million euros of 2020 bonds last year. Macedonia is ranked BB- at S&P Global Ratings, the third-highest non-investment grade and one step above its western neighbor. Macedonia raised 270 million euros in five-year bonds at a yield of 5.125 percent in November.

Citigroup Inc., Deutsche Bank AG, Erste Group Bank AG and Societe Generale SA are managing the offering, said the person who asked not to be identified as the information is private.

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