Romania launches 700-million 10-year bond to strong demand
LONDON – Romania on Friday sold what officials said would be its only international bond offering this year, a 10-year 700-million-euro deal, at a tighter spread than expected with the bond performing well in the after market. The yield premium of 342 basis points over benchmark swaps was narrower than the bond’s original yield of 350 basis points over Treasuries. «We consider we reached our (funding) needs this year,» Enache Jiru, Secretary of State at the Ministry of Public Finance, said in a conference call after the bond priced. Bankers said offers for 2 billion euros of bonds were received, four times the bottom end of the 500 to 750-million-euro target range for the bond to raise. Fund managers and analysts said that though the risk premium for the bond was tighter than expected, the bond had gained about half a point since its launch. «There are definitely some institutions that did not get as much as they wanted coming in,» said one fund manager. Demand for the bond was mostly from Germany with 27 percent, Britain had 17 percent and Italy also 17 percent. Funds accounted for 55 percent of demand, bankers said. The yield on offer Friday was considered expensive by fund managers. They said Romania was trying to tap the large funds heading for Eastern Europe after being scared out of Latin-American debt by the collapse of some bond valuations there last year. Although the bond is expensive compared to its ratings peers, its price is not bad for Eastern European debt, said Tim Ash, debt strategist at Bear Stearns in London. «Most regional credits are extremely tight given their fundamentals and you could argue they have over-bought the convergence story,» he said. Brazil, which like Romania is in the single-B ratings range, has a 9.5-percent 2011-maturity euro-denominated bond which was quoted at 84.5 percent of face value, a yield of around 12.38 percent. A premium of 342 basis points over swaps is a yield of around 8.73 percent. However, where emerging bonds are concerned, geography counted for more than rating, said Ash. «Brazil is in the wrong continent,» he said. «There is hardly any debt in this (Eastern European) region, so what else are people going to buy?» There are comparatively few bonds from the 10 countries due to join the European Union in 2004, providing they meet the club’s tough economic rules this year. That means Romania looks cheap compared with neighboring Bulgaria, said Ash. Bulgaria’s euro-denominated 2013-maturity bond was around 295 basis points over bunds, or 8.02 percent in yield. Bulgaria has two ratings in the BB range. Key to Romania’s outlook is an agreement with the International Monetary Fund on the release of $383 million in funds, something Jiru said he was optimistic would happen before the end of May. Other subjects of attention were British filmmaker Stephen Frears, Italian classics by Vittorio De Sica, and the Turk Tunc Basaran, who in 1991 was nominated for the Academy Award in the Best Foreign Film category.
