Latvia pushes Eurobond past political vacuum

By bne IntelliNews December 9, 2015

Latvia pushed a €550mn Eurobond issue through on December 8, despite the fall of the government a day earlier.

Pricing on the five-year bond tightened to 28bp above mid-swaps from mid to low-30s, according to the latest reports.  The state treasury plans to use the proceeds to repurchase around $650mn in dollar debt, according to a filing with the Luxembourg stock exchange. It is Latvia's second debt issue in recent months, suggesting the country is keen to tap cheap global money while it lasts.

The Baltic state was last in the international market in September, when it sold a €500m 10-year bond at 35bp over mid-swaps, an historical low at the time. The country sold its first sovereign bond in six years as it joined the Eurozone in January 2014. It priced a €1bn seven-year bond to yield 2.82%. The issue was more than four times oversubscribed.

Riga was reported to be talking with investors on a Eurobond issue at the start of the month, but it appears the deal may have been delayed by internal political disruption. Laimdota Straujuma quit as prime minister on December 7, bringing down the shaky coalition government. Parties are currently trying to build a new cabinet.

However, the vacuum does not appear to have put off investors, with Latvia the fastest growing of the Baltic states. Indeed, some analysts suggested the political issues could tempt investors.

“Latvia has solid macro underpinnings so don’t expect huge market impact,” wrote Tim Ash at Nomura on December 7. “Many people will see this as providing an opportunity to buy assets cheaply, which are otherwise hard to locate – at least on the eurobond front.”

The deal shows Latvia swapping its emerging markets investor base for a euro-based one, according to one of the lead arrangers, which included Barclays, Goldman Sachs and JP Morgan.

“This trade demonstrates very clearly the move that Latvia’s making out of dollar EM portfolios and into the euro rates buyer base,” a syndicate official told Euroweek. “A lot of EM investors still like the credit but for some — not all — it just doesn’t fall under their investment mandates anymore.”

Related Articles

Evolution Equity Partners closes $125mn cybersecurity-focused fund

Evolution Equity Partners announced on 17 July the final closing of a new fund with total capital commitments of $125mn to make investments in cybersecurity and next generation enterprise software ... more

Central European and Baltic economies shrugging off political uncertainty

Medium-term economic growth forecasts for Central Europe and the Baltics have been raised by The Vienna Institute for International Economic Studies (wiiw) in a report issued on June 29. The most ... more

Germany and Gazprom question need for EU talks on Nord Stream 2

A joint EU mandate to discuss the operating rules that would apply to Russia's planned Nord Stream 2 gas pipeline is not necessary, Angela Merkel said on June 15. Russian state-controlled ... more

Dismiss