Slovenia sets out on Eurobond roadshow

By bne IntelliNews March 27, 2012

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Slovenia is setting out on a roadshow, with a new bond issue to follow, as it joins the growing crowd looking to take advantage of lower borrowing costs across Europe.

"The transaction will be carried out in the near future, depending on market conditions," the finance ministry said in a statement on March 26, Bloomberg reports. The country could sell as much as €2.8bn in debt this year, Bostjan Plesec, the chief of the debt management agency, said in January.

Analysts suggest an issue of €1bn - 1.5bn is on the cards, with the finance ministry confirming it has hired BNP Paribas, HSBC, JPMorgan, Societe Generale and UniCredit to organize meetings with investors in Europe. An unnamed source at one of the banks says the roadshow will kick off this week, newswires report.

Slovenia is looking to emulate CEE peers such as Poland, Slovakia and the Czech Republic which have all tapped international markets this year since the ECB unleashed a second round of cheap three-year loans to boost liquidity. Coupled with a recovery in risk appetite as macro indicators suggest the effects of the debt crisis may not be as catastrophic as feared towards the end of 2011, borrowing costs for Europe's periphery markets have dropped significantly.

Concern over Slovenia's close economic ties with the likes of Italy, its fragile banking system, a lack of reform and a political logjam provoked a rash of ratings cuts and pushed the yield on its 10-year bonds above the 7% threshold generally seen as unsustainable in November.

However, with a new government promising a raft of reform, Slovenia has watched its borrowing costs retreat; its bond maturing in January 2021 was trading at 5.147% on March 26. Like others, it now wants to take advantage of current conditions and raise debt to help plug a deficit that the government hopes to quash to 3% of GDP in 2012 after introducing austerity measures.

Analysts have said that on top of spending cuts, the government will need to borrow funds to increase state investments and possibly give a financial injection to some private companies after the economy recorded a 0.2% contraction in 2011, and with another retreat forecast for this year.

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