Bulgaria to go ahead with EUR 1.5bn Eurobond despite rating downgrade, run on local bank - report

By bne IntelliNews June 25, 2014

Bulgaria will stick to its plan to issue a EUR 1.5bn Eurobond despite S&P's recent sovereign credit rating downgrade to BBB- and an expected state intervention to rescue troubled local lender Corpbank as these are not expected to push yields up to unattractive levels, according to two sources familiar with the sale, quoted by Reuters.

Bulgaria began an European investor roadshow on June 23 in a bid to raise money to finance this year's planned budget deficit of BGN 1.5bn (EUR 767mn) and also to retire some USD 1.1bn worth of USD-denominated global bonds that expire in January 2015.

One Reuters source said that the rating cut and the Corpbank events will pressure the yields, but there would not be a massive correction.

S&P lowered on June 13 Bulgaria's sovereign credit rating by one notch to BBB-, just one notch above junk. A week later, Corporate Commercial Bank (Corpbank), Bulgaria's fourth-largest lender, asked BNB for help, realising that depositors are withdrawing vast amounts of cash, triggering a bank run. BNB acted immediately by freezing all of the bank's operations and taking control over it. Depositors were queuing outside Corpbank cash points prompted by the indictment of Tsvetan Gunev, the deputy governor of the central bank in charge of supervising lenders and their loan books, as well as by various media speculation.

Gunev allegedly failed to act when Corpbank exceeded the limit for bad loans after it lended money to firms associated with its controversial majority owner, Tsvetan Vasilev. If the allegations turn to be true, this would mean that Corpbank may be facing a capital black hole, on top of its liquidity problems.

The government of PM Plamen Oresharski intends to rescue the bank by writing off the stakes of Corpbank's current shareholders and it would also order the state-owned Bulgarian Development Bank and the country's Deposit Insurance Fund to inject capital into the banking group. The amount of the capital needed to prop up the banking group will become known only after independent auditors carry out a full audit of its books.

Bulgaria is expected to set the terms on the Eurobond on Thursday (June 26), which may be split into two tranches of different maturities. Jefferies bank analyst Richard Segal, who attended the roadshow, expects one tranche of 7-to-10 years' maturity and another at 15 years, Reuters said.

Related Articles

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

EBRD says 2016 net profit was around €1bn

The European Bank for Reconstruction and Development (EBRD) said it made a net profit of around €1bn in 2016, up by a quarter from the €802mn it made in ... more

New Bulgarian government reports irregularities in defence contracts

A check on public procurement under Bulgaria’s previous centre-right government has revealed dozens of violations in the defence ministry, caretaker Prime Minister Ognyan Gerdzhikov said on ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss