Romania raises USD 750 mln from ten-year bond issuance

The Ministry of Finance issued ten-year bonds last week on the US market, raising USD 750 million at a yield of 6.45 percent. Investors’ interest was significant as the offer was oversubscribed fourfold at USD 3.2 billion. Banking giants Citigroup, Deutsche Bank and HSBC Holdings handled the deal.

At the end of January, Romania tapped the US market after 16 years and raised USD 1.5 billion at a yield of 6.87 percent, although bidding for the offer amounted to USD 7 billion.

“We issued new bonds because there is still demand in the market for Romanian bonds, and investors wanted exposure in Romania, so we took advantage of this opportunity to gain some financing at a lower cost,” said Bogdan Dragoi, minister of Public Finance.

Romania’s latest bond offer attracted investors from the US, UK, Europe and Asia, according to data from the Finance Ministry. Fund managers represented 61 percent of investors, followed by hedge funds on 16 percent. Insurers, pension funds and central banks bought 15 percent of the bonds. Retail banks and investors purchased 5 percent while other investors acquired the remaining 3 percent.

Dragoi said US investors’ share had dropped by 6 percent against the previous bond offer while the UK’s take-up increased by 5 percent. In addition, the share of Asian investors doubled to 5 percent. The minister said this was a clear sign that the markets had gained confidence in Romania. In 2010 the government approved a bond issuance program for 2011-2013, aiming to raise EUR 7 billion from external markets. This year, Romania plans to raise EUR 2.5 billion by selling bonds on external markets.

The Finance Ministry aims to improve financing on the domestic market and cut costs, by creating an adequate yield curve for bonds maturing in between 6 months and 15 years. In the local market, bonds maturing at 6 months are yielding at 5.22 percent. The ministry has issued 15-year bonds, in a move intended to ease the pressure on financing the existing debt, by securing short-term financing.

Ovidiu Posirca