Finance Ministry Refinances Only EUR600M Of Its EUR2.5B Maturing Debt

07.27.2011 By Razvan Voican

The Finance Ministry plans to sell EUR600 million at a four-year foreign currency bonds auction Wednesday, a few days before it has to repay a bond issue worth EUR1.21 billion and a EUR1.26 billion club loan.

The comfortable situation of treasury funds allows the state to refinance only half of the maturing debt, with Wednesday's issue expected to be oversubscribed considering the large volume of liquidity set to return to the market.

For the new issue, the Finance Ministry has chosen an atypical maturity, of four years. However, 2015 will see a payment spike on the funding package from the International Monetary Fund, the European Union and the World Bank, when the Finance Ministry is due to pay EUR1.8 billion.

Still, the EUR600 million will mark a new step in the strategy of increasing the average maturity of the public debt, with one-year securities being replaced by four-year ones.

The coupon was set at 4.7%, with the nominal value of a bond being EUR50,000. The new bonds can be bought both by individuals and by companies through the 12 banks acting as primary dealers.

Depending on how large the final amount raised through Wednesday's bond issue is, it will result in a significant reduction in the government's public debt, of over EUR1 billion. At the end of April, the government's public debt amounted to 184 billion lei (EUR43.27 billion), up 0.8% against the end of 2010. (EUR1=RON4.25)

(English version by Daniela Stoican)