04.06.2014

"Bulgaria is stable on the international capital markets and on the domestic government debt market". This is what Minister of Finance Petar Chobanov said at the meeting of the Budget and Finance Committee of the National Assembly which reviewed the draft ratification submitted by the Government concerning the assumption of external debt. He added that these estimates were made by both national and international experts and according to them Bulgaria will continue being the EU member with second lowest debt even in the medium term until 2017. The Ministry of Finance data also show that the average weighted yield of GS issued on the domestic market in the period January - May 2014 is 1.06%, of which the yield of interest-bearing bonds being 2.43%, and of discount bonds being 0.54 per cent. "There is constant drop in the yield of issues on the domestic market, which proves that the country is fiscally stable. On the international capital markets we are also considered as a stable and predictable issuer, the CDS being around 120 b.p., which ranks us among a group of states such as Lithuania and Latvia with higher credit rating", the Minister of Finance specified.

As to the issue, Minister Chobanov said that it was planned as early as the discussions of the 2014 state budget, with the ceiling that may be assumed by the state having been approved then. The issue is to the amount of up to EUR 1.493 billion, with the bills maturing maximum 15 years after the date of issuance. There is thus a possibility for long-term financing at the current low interest rates, said the Minister of Finance. The issue funds will be used to refinance external debt maturing at the beginning of next year to the amount of around BGN 1.6-1.7 billion, as well as to cover debt of around BGN 1.3 billion maturing this year. The bonds to be issued by Bulgaria will be subject to the English law and will be traded on the Luxembourg stock exchange.

The Minister of Finance also specified that the specific structuring of the issue itself, either a single or a double tranche and the different maturities, will be done at a later stage on the basis of the relevant status of the international markets. He added that the market price was currently favourable, which was evident from the actions of a number of CEE countries. According to Mr. Chobanov, the unstable and complex situation in Ukraine was not influencing the debt demand, with the expectations being that ECB would continue its policy of maintaining low interest rates and injecting liquidity in the financial system. This would further increase the demand of EUR-denominated bonds and would result in potential decrease in the bond yields.