The Finance Ministry is trying to sell 400 million euros' worthof bonds in Bucharest today and sources on the market say thatthere are also talks for a new 'club loan' like that in July, giventhe serious shortage of cash the state is facing after theinstalments of the foreign loan have been postponed.
The Finance Ministry's thirst for cash would lead to a club loan ofat least 500 million euros, an option often discussed in recentweeks.
"There have been talks over a new club loan over the past weeks,and the first signs show it to stand at about 500 million euros.This time the maturity should be longer, of up to four years, giventhat banks will probably ask for a higher interest, of more than5.25% a year. Nothing has been put in writing yet," a bankercommented.
With the ongoing political crisis, Romania was unable to collectthe one billion-euro tranche from the European Union and another300 million euros from the World Bank. At the same time, no oneknows for sure if the third instalment from the IMF, worth 1.5billion euros, which should have been transferred in November, willcome this year. Therefore, if it does not receive the money fromthe foreign lenders, the state has to borrow from the local marketto be able to pay salaries and pensions.
"It is only natural considering that foreign markets are closed toan eurobond issue and the prospects of receiving the tranches ofthe foreign loan from the IMF and EU are uncertain," said anotherbanker who chose to remain anonymous.
President Traian Basescu said on a radio show yesterday that heguaranteed that salaries and pensions would be paid in full inNovember and December, though not with the IMF's money but fromdomestic loans, which come at higher costs.
By resorting to a club loan, the Finance Ministry is doing the samething it did in the second half of July. Back then the FinanceMinistry got a two-year club loan worth 1.2 billion euros fromeight major banks on the market, among which BCR, BRD, Bancpost,Raiffeisen and Banca Transilvania, at a 5% interest per annum.Major players such as ING, UniCredit Tiriac and CEC did notparticipate in this.
The Finance Ministry did not want to go public with this deal.Negotiated behind closed doors, the arrangement of the loan in Julywas only confirmed by President Traian Basescu, who said at thetime that the loan was to be used to restructure short-term debtand that the Ministry had got much better prices than it would havehad it turned to foreign markets.
The 'club loan' financing option is more flexible and simpler thana eurobond issue or a syndicated loan and can be used several timesa year depending on the needs of the Finance Ministry, which arebecoming greater as a result of the steep decline in budgetaryrevenues.
Compared with the arrangement this summer, banks may be more orless involved than they were and there may also be some newplayers, sources taking part in the talks say.
The negotiations are conducted by the two banks that were thearrangers of the club loan in the summer, BCR and BRD.
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