Albania mulls new five-year Eurobond issue of up to €500mn

Albania mulls new five-year Eurobond issue of up to €500mn
By Valentina Dimitrievska in Skopje December 14, 2017

Albania is reportedly planning a new five-year Eurobond issue of up to €500mn to refinance its declining but still high outstanding external debts. 

Last time Albania tapped international financial market was in 2015 when it placed a five-year sovereign Eurobond worth €450mn, with interest rate of 5.75%. The issue was intended for the repayment of the country’s public debt. 

The plans for tapping the international market are included in the government’s new 2018-2020 mid-term debt management strategy, daily Tirana Times said in an article on December 12.

The Albanian government’s press office did not immediately reply to bne IntelliNews on December 14 to confirm the information.

Tirana's plans were revealed amid growing investor interest in comparatively high-yielding sovereign debt from either new or infrequent issuers that has seen frontier markets such as Tajikistan tap international markets. Dushanbe issued raised $500mn from its inaugural international bond in September.

The Albanian government is understood to be planning to refinance its foreign debt without affecting domestic lending, which has been struggling to return to positive growth rates amid poor demand and a high level of non-performing loans (NPLs).

In October, lending registered a slim annual growth for the second month in row after declining in the previous five months.

The NPL ratio fell to a record low of 14.45% at the end of October, but Albania's central bank is taking new measures to cut it further, as it is still high. New measures envisage the establishment of regulatory criterion, according to which lending will depend on tax declarations starting from 2018.

The period of the issuance of the new Eurobond was not specified. The previous five-year Eurobond will mature in 2020.

Albania sold its first Eurobond in October 2010, raising €300mn to finance the budget gap, with an annual interest rate of 7.5%.

Albania’s gross external debt narrowed by 0.6% y/y to €7.833bn at the end of the third quarter of 2017, following a 0.3% annual increase in the previous quarter.

Standard & Poor's rates Albania at 'B+/B'.