After 7 years, Serbia has returned to the dollar stock market

Today, the Republic of Serbia successfully returned to the dollar stock market, after a seven-year hiatus, due to the early redemption of 2011 US dollar bonds at a rate of return of 7.5% and a coupon rate. of 7.25%.

After the presentation to the international investing public of the macroeconomic results achieved by the Republic of Serbia, as the country with the least economic decline in Europe this year, as well as the highest growth expected in the next, today we begin to collect offers for a new issuance of bonds worth 1,200 million dollars.

“The demand of more than six billion dollars has been served by more than two hundred funds, insurance companies and respectable banks, mainly American and British, which is five times the offered value of the issue. All this demonstrates the great confidence of investors in the reforms implemented by the government. From the Republic of Serbia in the field of economy and public finance, “said Finance Minister Siniša Mali.

The new ten-year bonds were issued for an amount of 1,200 million dollars at a yield of 2.35%, a coupon of 2.125% and a final interest rate in euros, after carrying out a hedging operation, of 1.066% . 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 take advantage of the favorable conditions, the best of this year, to enter the international financial market again 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 debt market. capital, even better than bond issuance. ” since June and November 2019 at a time of significantly more stable market conditions, “said Finance Minister Sinisa 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 maturing in September 2021.

“In this way, Serbia managed to repay most of the bonds at the beginning of this year, save on interest payments next year and thus reduce the total need for financing in 2021, so that we can be as strong and ready as possible to next year, “Mali noted.

The Minister also said that, guided by the best international practices of active management of public debt, the Ministry of Finance concluded a foreign exchange transaction whereby it converts the liabilities based on the bond issued in euros at a rate of significantly lower final interest.

The Republic of Serbia will pay its obligations 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 best price of debt, 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 impetus to the development of the domestic financial market through the example of the active management of financial risks by the Government of Serbia.

“The return to the dollar stock market 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 on the map broader international investment “, concluded the minister. 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 market conditions favorable to provide additional funds for debt service in the coming year.

(Kurir.rs)

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