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Ministry of Finance PRESS RELEASE: Successful Issuance of Montenegrin ...
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PRESS RELEASE: Successful Issuance of Montenegrin Eurobond
Published on: Sep 10, 2010 • 4:25 PM Author: Ivona Mihajlović - administrator
Montenegro was more that successful at its début at the global capital markets with the issue of 200 million euro of Eurobond.
The presentation, so-called road show preceded this transaction consisting of visits to London, Zurich, Munich, Frankfurt and Vienna, where the representatives of the Ministry of Finance and the Central Bank met with numerous investors and presented economic and fiscal indicators of Montenegro.
After the Greece’s crisis, out of the countries not present at the bond market, Montenegro was debutant at the market and was successful in issue of and placing of Notes. The entry of Montenegro at the market of Eurobond is practically historical having in mind that Montenegro is present for the first time as well as the events at this market caused by the Greek crisis.
Montenegro impressed investors, and to support that is the fact that the demand was more than 600 million euro, which is a unique case for a country entering the market of Notes for the first time to be able to reach a demand as high three times the offer. More than 140 investors from 25 countries from Europe, Asia, and United States of America have submitted bids, and 125 investors have bought the Notes.
At the same time, the fact that the timing was immediately after the summer months should be taken into account as well, and the high interest of investors indicates that investors have confidence in our economic and fiscal policy and that our economic policy is taking a good direction.
Notes were issued with five-year maturity, interest rate is fixed at 7.85% and the lead arrangers were Credit Suisse and Deutsche Bank; Erste Bank was the transaction manager and Linklaters, London based law firm, was legal adviser in the process of the project preparation.
Following is the breakdown of buyers of our Notes: funds 45%, banks 38%, private banks 10%, hedge funds 3%, insurance companies 2%, other 2%; and in terms of geographic distribution: United Kingdom 30%, Germany/Austria 24%, Switzerland 22%, USA 6%, Scandinavian countries 6%, eastern Europe 3%, other 9%.
We are of the opinion that Montenegro has diversified significantly its investors’ base with this successful transaction, while being a debutant, by issuing Notes in euro after turbulences happening in global markets over the course of previous months, which at the same time justified our estimates concerning us entering the market.
We trust that two issues that took place last couple of days – Montenegro and the Czech Republic – will impact the improvement of the market conditions and regaining the confidence in euro.
Market had already positive reactions, thus an increase in demand and price of our notes on the secondary market was recorded, and its value is higher now than when issued. This is also evidence that Montenegro was careful in listening needs of investors during the road show, which will most likely be welcomed by the investor community that may result in a reward over the concession price for future offers of Montenegro.
PROJECT BACKGROUND – LEGAL ADVISER AND ARRANGER
The Project design was such to have an implementation in several phases; in the first one was the invitation to renowned legal firms to assist in drafting of the country Prospectus, to present Montenegro, first time entrant on the Eurobond market, to investors. The Prospectus contains data on core and economic indicators for the country. London based Linklaters was selected as legal adviser for this task, lawyers of Linklaters are advising leading global companies, financial institutions and governments in their most important and complex transactions.
In the next phase we have selected the arrangers: Deutsche Bank and Credit Suisse. The task of the arranger is to assist country is the organisation of the auction and selection of markets or investors that are interested for our notes.
WHY EUROBOND?
The Eurobond market is huge and an estimate is that total transactions at this market this year will amount to several billion euros.
First, Eurobond is the most liquid borrowing instruments, much better than bilateral syndicated loans and other debt instruments, and for investors it is security that could be collected on any day before are due.
Furthermore, the entry of Montenegro on the European markets represents an excellent opportunity for the investors that have not invested in our country so far to be better informed of possibilities for investment, while on the other hand it opens doors for our financial institutions and economic undertakings to enter this Market.
At the same time, such way of borrowing shows that investors have confidence in the public finances of a given country, which is important for attracting new investors.
WHAT WILL BE FINANCED WITH THIS MONEY?
As planned under the Law on Budget for 2010, this money will finance deficit and debt repayment.
WHEN IS THE INSTALMENT DUE? HOW WILL BE MONEY PAID BACK?
The State is paying an annual interest rate, and after five years the entire amount is paid back. As is the case for all borrowing forms these funds will be planned under the annual budget law.
PR OFFICE
MINISTRY OF FINANCE
The presentation, so-called road show preceded this transaction consisting of visits to London, Zurich, Munich, Frankfurt and Vienna, where the representatives of the Ministry of Finance and the Central Bank met with numerous investors and presented economic and fiscal indicators of Montenegro.
After the Greece’s crisis, out of the countries not present at the bond market, Montenegro was debutant at the market and was successful in issue of and placing of Notes. The entry of Montenegro at the market of Eurobond is practically historical having in mind that Montenegro is present for the first time as well as the events at this market caused by the Greek crisis.
Montenegro impressed investors, and to support that is the fact that the demand was more than 600 million euro, which is a unique case for a country entering the market of Notes for the first time to be able to reach a demand as high three times the offer. More than 140 investors from 25 countries from Europe, Asia, and United States of America have submitted bids, and 125 investors have bought the Notes.
At the same time, the fact that the timing was immediately after the summer months should be taken into account as well, and the high interest of investors indicates that investors have confidence in our economic and fiscal policy and that our economic policy is taking a good direction.
Notes were issued with five-year maturity, interest rate is fixed at 7.85% and the lead arrangers were Credit Suisse and Deutsche Bank; Erste Bank was the transaction manager and Linklaters, London based law firm, was legal adviser in the process of the project preparation.
Following is the breakdown of buyers of our Notes: funds 45%, banks 38%, private banks 10%, hedge funds 3%, insurance companies 2%, other 2%; and in terms of geographic distribution: United Kingdom 30%, Germany/Austria 24%, Switzerland 22%, USA 6%, Scandinavian countries 6%, eastern Europe 3%, other 9%.
We are of the opinion that Montenegro has diversified significantly its investors’ base with this successful transaction, while being a debutant, by issuing Notes in euro after turbulences happening in global markets over the course of previous months, which at the same time justified our estimates concerning us entering the market.
We trust that two issues that took place last couple of days – Montenegro and the Czech Republic – will impact the improvement of the market conditions and regaining the confidence in euro.
Market had already positive reactions, thus an increase in demand and price of our notes on the secondary market was recorded, and its value is higher now than when issued. This is also evidence that Montenegro was careful in listening needs of investors during the road show, which will most likely be welcomed by the investor community that may result in a reward over the concession price for future offers of Montenegro.
PROJECT BACKGROUND – LEGAL ADVISER AND ARRANGER
The Project design was such to have an implementation in several phases; in the first one was the invitation to renowned legal firms to assist in drafting of the country Prospectus, to present Montenegro, first time entrant on the Eurobond market, to investors. The Prospectus contains data on core and economic indicators for the country. London based Linklaters was selected as legal adviser for this task, lawyers of Linklaters are advising leading global companies, financial institutions and governments in their most important and complex transactions.
In the next phase we have selected the arrangers: Deutsche Bank and Credit Suisse. The task of the arranger is to assist country is the organisation of the auction and selection of markets or investors that are interested for our notes.
WHY EUROBOND?
The Eurobond market is huge and an estimate is that total transactions at this market this year will amount to several billion euros.
First, Eurobond is the most liquid borrowing instruments, much better than bilateral syndicated loans and other debt instruments, and for investors it is security that could be collected on any day before are due.
Furthermore, the entry of Montenegro on the European markets represents an excellent opportunity for the investors that have not invested in our country so far to be better informed of possibilities for investment, while on the other hand it opens doors for our financial institutions and economic undertakings to enter this Market.
At the same time, such way of borrowing shows that investors have confidence in the public finances of a given country, which is important for attracting new investors.
WHAT WILL BE FINANCED WITH THIS MONEY?
As planned under the Law on Budget for 2010, this money will finance deficit and debt repayment.
WHEN IS THE INSTALMENT DUE? HOW WILL BE MONEY PAID BACK?
The State is paying an annual interest rate, and after five years the entire amount is paid back. As is the case for all borrowing forms these funds will be planned under the annual budget law.
PR OFFICE
MINISTRY OF FINANCE
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