By Stelios Orphanides
The Finance Ministry said that it intends to issue a 7-year government euro denominated bond “in the near future depending on market conditions,” and use receipts to buy back outstanding securities.
The securities in question are three bonds, one at a coupon rate of 4.75 per cent maturing on June 25, 2019, another at a 4.625 per cent rate maturing on February 3, 2020 and the third at a rate of 6.5 per cent maturing on May 2, 2020, the finance ministry said in an emailed statement on Monday. The nominal value of the three securities is €566m, €566m and €80m respectively.
The underwriters of the new bond issue, which will be the fifth since the 2013 banking and fiscal crisis, will be Citi Group, Goldman Sachs International Bank and HSBC.
A month ago, Finance Minister Harris Georgiades said that the government was considering asking the International Monetary Fund for permission to repay earlier than agreed part of the €1bn loan received as part of Cyprus’s bailout agreed in 2013. Georgiades said that Cyprus could save up to 0.5 percentage points in interest by repaying €280m.
On June 8, the IMF welcomed the government’s intention.
Cyprus, which is rated BB+ by Standards & Poor’s, BB- by Moody’s Investors Service and Fitch Ratings and BBL (stable) by DBRS, saw the yields of its bond maturing in 2025 drop to historically low levels in recent weeks. On Monday morning, the security with a coupon rate of 4.25 per cent was traded €110.144 which translates to a secondary market yield of 2.87 per cent.
Last year, government debt stood at 107.8 per cent as a percentage of economic output. The government, which generated a fiscal surplus of 0.4 per cent of the economy last year, is forecast to post a surplus of 0.2 per cent this year in which the economy is expected to grow 2.9 per cent compared to 2.8 per cent in 2016.