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After presenting the macroeconomic results achieved by the Republic of Serbia to the international investing public, as the country with the lowest economic decline in Europe this year, as well as the highest growth expected next year, today we begin to collect offers for a new issuance of bonds worth $ 1.2 billion.
– More than two hundred funds, insurance companies and reputable banks, mainly American and British, made a demand of more than six billion dollars, which is five times more than the offered value of the issue. All this shows the great confidence of investors in the reforms implemented by the Government of the Republic of Serbia in the field of economy and public finances – said Finance Minister Siniša Mali.
The new ten-year bonds were issued for an amount of 1,200 million dollars with a yield of 2.35 percent, a coupon rate of 2.125 percent and a final interest rate in euros, after carrying out a transaction of coverage, 1,066 percent. The realized rate is seven times lower than the rate on bonds previously issued in 2011, which was also the target of the new issue. The bonds will be listed on the London Stock Exchange.
– We use favorable conditions, the best of this year, to re-enter the international financial market and replace the most expensive debt with a much cheaper one. In addition, this is the lowest interest rate that our country has received in the capital market, better even than the bond issuance of June and November 2019 at a time of significantly more stable market conditions, said the Minister of Finance Siniša Mali.
He added that the funds from the new issue are repaying $ 900 million of bonds issued in 2011, out of a total of $ 1.6 billion due in September 2021.
– In this way, Serbia managed to repay most of the bonds at the beginning of this year, save on the interest payment next year and thus reduce the total need for financing in 2021, so that we can be as strong and ready as possible for next year – said Mali.
The Minister also said that, guided by international best practices in active management of public debt, the Ministry of Finance concluded a foreign exchange transaction by which it converts liabilities based on the bond issued in euros at a rate of significantly lower final interest.
The Republic of Serbia will pay its liabilities on the basis of the issue denominated in dollars in euros at a coupon rate of 1.066% of the nominal value of the issue after conversion of 1.016 million euros.
– This means that the Ministry of Finance seized the opportunity of a favorable exchange rate of the euro and the dollar at this time, as well as the current divergence between the interest rates of the dollar and the euro in the international capital market and achieved the better debt price, optimizing the monetary structure of public debt. of the risk of changes in the exchange rate – explained the Minister. In this way, additional savings of around 11.6 billion dinars were achieved.
As you said, in this way, the Republic of Serbia is introducing a new hedging practice for the first time, ie. use of financial derivatives for the purpose of hedging exchange rate and interest rate risk, in accordance with internationally recognized ISDA (International Swaps and Derivatives Association) standards This gives a strong boost to the development of the national financial market through the example of the active management of financial risks by the Government of Serbia.
– Return to the stock market in dollars and a new issue denominated in dollars, allows Serbia to remain present in the emerging markets bond index – EMBI Index, which ensures its visibility in the US capital market, as well as in the broader map of international investments – concluded the Minister of Finance.
Through early repayment of dollar bonds with newly issued funds, the share of general government debt in GDP remains at the previously projected level, below 60%, while at the same time using favorable market conditions. to provide additional funds for debt service in the coming year.
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