Slovenia issues dollar bond in bid to ward off bailout

By bne IntelliNews October 22, 2012

bne -

On the back of strong demand, Slovenia upped the volume of a 10-year dollar bond issue October 19, raising $2.25bn to stave off the risk of becoming the next Eurozone country to need a bailout.

Slovenia had initially planned to issue only $1.5bn, but good demand meant it raised the size of the issue, which was priced to yield 5.7%. The yield on its existing 10-year sovereign bond peaked at 7.6% in August, but has since eased and stood at 5.6% on the day of the sale, according to Reuters data.

Slovenia last came to market in January 2011, when it sold €1.5bn each of 10-year and 15-year bonds, but had to cancel another euro issue earlier this year as investors backed off, alarmed by the country's deteriorating finances. The economy is back in recession, crippled by banks that are creaking under the weight of bad loans. The country's lenders had €6.5bn of bad loans on their books at the end of September. That's 55% up on the year, equivalent to around 18% of GDP, and the volume of NPLs is still growing.

The government adopted pension and labour reforms in October, aimed at averting the need to seek a bailout loan from the EU and IMF. The new reforms will gradually raise the retirement age to 65 and make it easier to hire and fire employees in order to give a boost to the economy. It also plans to form a state-owned company that will take over the bad debts of local banks.

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