Romania sells EUR 3.5 bln Eurobonds and nears full-year foreign borrowing target

Romania on July 7 raised EUR 3.5 bln with two bonds issues, with maturities of nine years (EUR 2 bln) and twenty years (EUR 1.5 bln), under the medium-term notes (MTN) program, Ziarul Financiar daily announced quoting Bloomberg terminal data.

After the EUR 3.5 bln bonds issued in April, the country is close to the EUR 7-7.5 bln target for foreign financing planned for this year. Last year, Romania borrowed EUR 8.8 bln and USD 3.3 bln from foreign markets.

The latest issues on July 7 reveal investors’ rising risk-aversion, as the spread for the 20-year tenant (a measure of the perceived risk associated with Romanian sovereign debt) increased by 25bp compared to April.

The spreads above mid-swap were set on July 7 at 180bp (9-yr tenant) and 260bp (20-yr tenant), respectively. In absolute terms, the yields at issuance were set at 2% and 3.2%, respectively.

For both tranches, the interest (coupon) is fixed, payable annually. This was 25bp and 20bp, respectively, below the benchmarks announced before subscription.

In April, Romania issued Eurobonds with maturities of 12 and 20 years, at spreads of 195bp and 235bp, respectively.

On a positive note, the demand for Romanian debt remains strong, with investors placing on July 7 orders of about EUR 9.5 bln (EUR 5.75 bln for nine years and EUR 3.75 bln for 20 years), nearly three times more than the final volume raised.

According to Bloomberg data, this Eurobond financing has as bookrunners Erste, ING, JP Morgan, Raiffeisen Bank, UniCredit.

Regarding the public debt, it neared 50% at the end of April and must have crossed the 50% threshold before the Eurobonds issued in July. Most likely, it will stay under 55% at the end of July since the latest Eurobond issues account for some 1.5% of GDP, and the domestic borrowing has slowed down recently.

The 55% of GDP level is indicated by the National Bank of Romania (BNR) governor as desirable for the peak. Speaking after the monetary board meeting on July 7, he said that public indebtedness of under 60% raises no serious concern, but, ideally, it should peak under 55% and then decrease, Profit.ro reported.