The 750m-euro eurobond issue Romania launched last week does not involve any foreign exchange risks as, by the time it matures, in 2018, the domestic currency will be the euro, states Stefan Nanu, head of the state Treasury, who dealt with the Finance Ministry's return to foreign markets.
Nanu, 33, says talks with investors indicated the ten-year maturity was the most attractive, with the market's interest being confirmed by Poland's and the Czech Republic's recent issues. "Additionally, the five-year benchmark interest rate was also higher." He considers the domestic market could not be an alternative.
Nanu states Romania's absence from the foreign capital market in the past five years has hurt borrowing conditions. He says that in such a context investors are paying close attention to the price they have to pay to hedge against credit default.
The decision to launch the issue was made once financing conditions improved.
The Finance Ministry and the NBR were quiet about the date of the issue, as the lead managers, UBS, CSFB and EFG Eurobank, had been selected back in winter and several meetings with investors were organised in European financial centres.
Nanu says subscription started last Wednesday at 11.00 and lasted around 2 hours, an interval during which around 1.3bn euros were raised, of which 750m euros were accepted, at an annual interest rate of 6.5%.
The first information reached the market as late as in the afternoon. "The main target of the issue was to refinance the eurobonds falling due this month," says Nanu.
Answering criticism about the moment that was chosen for the launch of the issue, Nanu says the outburst of the financial crisis and its size could not have been anticipated.
"This is the market now. A year ago, we couldn't have known a crisis would emerge. We had planned the issue for the second half of the year, but in August-September the crisis came, conditions were deteriorating and liquidity shrank so much that there was also an execution risk, that is of not being able to raise money at the desired price or in a margin very close to it".
With the 750m euros, the Finance ministry will cover both eurobond refinancing and budgetary deficit financing.
"To finance the deficit, we are left with around 150m euros, which we raised at a better cost than had we borrowed from the domestic market". Nanu says this does not mean the ministry will again mainly resort to foreign financing, as it did after 2000.
This year, the ministry plans to 85% secure the necessary financing for the budget from the domestic market, with just 15% to come from foreign loans.
Nanu states financing policy inconstancy has been one of the problems of the Treasury.
Stefan Nanu
April 2007-now: general manager of the state Treasury
June 2005-April 2007: personal adviser of the secretary of state in charge of the Treasury
December 2004-June 2005: specialist in capital markets, non-banking financial sector and banking privatisations in the premier's office
April 2003-December 2004: head of the financial markets department, the state Treasury Management Unit
October 1998-March 2003: Finance Ministry expert
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