Bulgaria pays off 880M euro bonds

Bulgaria has paid 880 million euro on bonds due on January 15, using the proceeds from new bonds issued in July 2012, Deputy Finance Minister Kalina Karaivanova said on January 10.

The Finance Ministry successfully sold five-year bonds worth 950 million euro in July, with the new issue carrying an annual coupon of 4.25 per cent. By comparison the bonds due on January 15 carried a coupon of 7.5 per cent.

After the payment, Bulgaria’s government debt stood at 6.15 billion euro, the equivalent of 14.75 per cent of gross domestic product, Karaivanova said.

Last year’s bond issue was Bulgaria’s first foray on international markets and was praised for its good timing, taking advantage of swelling market optimism in the wake of a European Council decision to recapitalise ailing banks, but also strong domestic Budget data.

The debt now being paid off was issued in 2002 by the Simeon Saxe-Coburg cabinet to swop for US dollar-denominated Brady bonds. It had an immediate effect of reducing currency risk, but the subsequent devaluation of the US dollar versus the euro cost Bulgarian taxpayers about a billion leva over the lifetime of the bonds, an inquest by the Finance Ministry found in 2011.

Bulgaria’s next major debt repayment is due in January 2015, when the country has to repay bonds worth $1.1 billion (the interest coupon on that debt is 8.25 per cent).

The Cabinet had no plans to seek funding on international markets this year, but planned to sell 1.1 billion leva worth of debt on the domestic market, Karaivanova said.

(Photo: Miroslav Sárička)



The Sofia Globe staff

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