Tuesday, November 15 2016 17:54
Naira Badalian

Armenia plans another issue of Eurobonds

Armenia plans another issue of Eurobonds

ArmInfo. The Armenian  Government is planning another issue of Eurobonds before 2020. Deputy  Finance Minister of Armenia Atom Janjughazyan told ArmInfo that the  next issue of Eurobonds is aimed at successful management of the  country's state debt. 

Armenia launched its debut issue of bonds in Sept 19, 2013. The  volume of the issue was $700mln, the yield of the bonds - 6.25%, the  maturity - 7 years. The key underwriters of the first Armenian  Eurobonds were Deutsche Bank AG (London Branch), HSBC Bank plc. and  J.P.Morgan Securities plc. According to the Finance Ministry,  following the issue of the bonds, the demand for them exceeded the  issue amount for several times and totaled $3 bln. From September  2013 till late January 2014, the yield of the Armenian Eurobonds  dropped from 6.25% to 5.85-5.8% and amounted to nearly $56 mln.  

The second issue of sovereign bonds in the amount of $500 mln,  10-year maturity and 7.5% yield took place on 19 March 2015. The  proceeds from the second issue of Eurobonds totaled $487 mln. Part of  the amount received from the sale of these bonds ($205 mln) was spent  on the buyout of the first issue of the bonds. The remaining part was  transferred to the treasury account of Armenia and to the budget  system of the country. Experts said that this proved to be the most  expensive foreign debt the Government had ever attracted. 

Meanwhile, Atom Janjughazyan said that the second issue of Eurobonds  proved to be successful. The deputy minister is convinced that if the  country failed to buy out $200 mln of the debt in 2015, the state  debt serving in 2020 would not cost $921 mln, but much more, which  "would become a real horror for the budget". The expert stressed the  need to choose the right moment for the next issue of Eurobonds. If  at the moment of the issue the debt-to-GDP ratio is 90%, the yield  will be under threat; and quite the opposite - if positive  macroeconomic indices are ensured, the debt will be serviced at a low  interest rate. 

To note, by the Armenian Central Bank's data, in 2015 the  transactions with Armenian Eurobonds on the secondary market amounted  to 110.36 mln USD, with the average yield being 6.46%. In early 2015,  the Armenian bonds mainly appreciated and the yield ranged within  6-6.4%, whereas in late 2015 the bonds depreciated to 7%. In early  2016, amid the USD growth in the republic, depreciation remained at  7%.  However, by March 2016, amid appreciation of the national  currency, the Eurobonds started growing in price and the average  yield made up 6.44%. On April 5, Bloomberg reported that the price of  the Armenian Eurobonds (with the maturity till 2020) dropped right  after the outbreak of military actions (Azerbaijan's aggression in  April -editor's note), and the yield grew by 16 pct points to 6.52%.  Since early 2016, the yield of both Eurobonds and AMD government  bonds of Armenia has declined regardless of the April events.

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