Bulgaria’s budget and foreign policy committees approved at a joint meeting on June 6 the Government draft bill for a 950 million euro bonds issue. If passed, the bill will give the Cabinet the authority to sign a contract with three foreign banks to place the bonds.
Bulgaria’s Finance Ministry earlier picked BNP Paribas, HSBC and Raiffeisen Bank to manage the issue, with Luxembourg-based The Bank of New York Mellon C. A. chosen as the bond registrar.
Bulgaria will tap international markets for the first time in nearly a decade to repay debt due in January 2013. The maturing bonds were issued in 2002 and 2003 by the Simeon Saxe-Coburg cabinet to swop for US dollar-denominated Brady bonds. The subsequent devaluation of the US dollar versus the euro cost Bulgarian taxpayers about a billion leva, an inquest by the Finance Ministry found in 2011.
The Cabinet’s bill does not stipulate the size of the interest that Bulgaria will pay on the new bond issue, but caps it at no higher than 10 per cent. Reports in Bulgarian media have said that the interest rate could be as low as less than five per cent (the bonds due in January 2013 carry an interest rate of 7.5 per cent).
Neither does the bill specify the maturity of the new issue, but reports have claimed that the Finance Ministry has opted for maturity period of five years.
Opposition parties in Parliament, most notably the socialists, have already said that they would vote against the bill.
Socialist MP Plamen Oresharski, the finance minister in the socialist-led coalition government between 2005 and 2009, said that Bulgaria would not have needed to issue new bonds if the Cabinet had managed the country’s fiscal reserve properly.
“[The Socialist party] will never, for obvious reasons, support a new bond issue. There was a large enough fiscal reserve to cover repayment of these bonds and those maturing in 2015,” Oresharski said on June 6.
(Finance Minister Simeon Dyankov; photo: Finance Ministry)