YEREVAN, March 20. / ARKA /. Tatul Manaseryan, head of a Yerevan-based think tank called ‘Alternative’, said to ARKA that a market study suggests there are all grounds for the government to sell successfully $500 million Eurobonds.
According to Reuters, Armenia sold a $500 million 10-year dollar bond on March 19 for only the second time on record, paying a yield of 7.5%.
International law firm Cleary Gottlieb Steen & Hamilton LLC was hired by the government to act as an international consultant for the issue, while Deutsche Bank, HSBC Bank and JP Morgan will be the underwriters.
In Manaseryan’s words, by making the second issue of Eurobonds the government as a matter of fact is increasing its foreign debt, ‘but a successful placement of Eurobonds will allow it to refinance the debt.’
Plans to sell more Eurobonds at international debt markets were announced by the government on January 30 in order to finance its budget deficit.
‘Of course, the government could channel the proceeds from the sale into the real sector, however, the priority today is to finance its budget deficit,’ Manaseryan said.
‘The government has set a tradition of financing its budget deficit by seeking funds form external sources, but what it should do is to increase the share of domestic debt, by using also the proceeds from sale of Eurobonds. If the government succeeds in normalizing the situation with the state debt, then it could finance other important sectors of economy,’ Manaseryan said.
Armenia first issued $700 million worth dollar-denominated bonds in September 2013 at the yield of 6.25 percent. According to Armenian finance ministry, investors were ready to buy as much as $3 billion worth of Armenian external bonds. The bulk of $700 million was used to repay a $500 million Russian loan ten years ahead of schedule.
Armenian finance ministry said today it would make an official statement on the second issue of Eurobonds later in the day.
Moody’s downgraded Armenia’s bonds to a rating of Ba3 from Ba2 in January, changing its outlook to negative from stable. It cited declining remittances, uncertain foreign investment, exchange rate volatility and pressure on foreign exchange reserves. -0-
