The eurobond issue launched by the Bucharest Municipality on Friday has been subscribed at a value of 500 million euros and a rate of 4.125% per year, the lowest rate any Romanian entity has managed to obtain to date.
The eurobonds have a 10-year maturity, and are due on June 22, 2015.
The original sum was estimated at 120m euros, but favourable market conditions allowed the value of the loan to rise significantly to the upper limit approved by the Finance Ministry for Bucharest Municipality.
Over the last two years, Romania did not issue any eurobonds on the international market, however its country rating improved meanwhile to investment grade level as awarded by ratings agency Fitch at the end of 2004.
Bucharest eurobonds have been assessed by Standard&Poor''s, which, in late May, revised its long-term rating for Bucharest upwards by one notch from BB to the BB plus level, similar to that awarded for country risk. The issue was handled by the banks ABN Amro and JP Morgan.
For the previous eurobond issue launched by the Romanian state in 2003, the rate of interest was 5.75% on a seven-year maturity loan.
Over recent years, interest rate spreads for Romanian eurobonds over the levels for German bonds have descended continually, with only small fluctuations. For the issue due in 2008, for example, the interest gap narrowed from 5.92% at the time of the launch to the current 0.5%. The issue that will mature in 2012 began from a spread of 3.65% and has now reached 0.63%.
The funds the Bucharest City Hall will derive from the eurobonds are to be used for infrastructure projects, such as the construction of Basarab passageway, the parking facility at Gara de Nord, the acquisition of new trams for modernised lines and the construction of underground parking facilities in various areas.
Around 30 million euros from the loan will be invested in residential parking projects.
After a two-year break, the Finance Ministry is considering the possibility of launching a eurobond issue worth around one billion euros with a view to restructuring older issues, extending maturities and reducing reimbursement costs.
The foreign capital market is still the only available medium and long-term source of financing with overall clear cost benefits. Statistical data indicate a rising appetite for foreign financing, especially from the private sector. razvan.voican@zf.ro
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