Estonia to issue 10-year bonds worth EUR 1 bln

  • 2020-05-26
  • BNS/TBT Staff

TALLINN – The Estonian government is about to kick off an international offering of bonds worth at least one billion euros and with a maturity of 10 years. 

The interest rate on the bonds will become clear upon the conduct of the issue and it will depend both on the interest rates on the market as well as demand on the part of investors, the Ministry of Finance announced on Tuesday. 

"The Estonian state will be issuing long-term bonds for the first time after a 18-year break. Our state finances are in order, the volume of Estonia's public debt is among the smallest in the  European Union," Minister of Finance Martin Helme said in a press release on Tuesday.

The minister said that if not for the emergency resulting from the coronavirus, the Estonian state would not have to issue debt now either.

"In order for the state to have enough money to cover its expenses, we have to assume additional debt obligations in the present complex economic situation," he said.

The minister said the liquidity reserve of the state must be big enough for the execution of payouts by the state to be ensured also during more difficult times. The amounts to be raised through the sale of the bonds will be used to finance the state budget as well as the supplementary budget adopted in April. 

According to Helme, the issue of bonds by the state is a positive step also for the development of the Estonian capital market.

"The risk margin of the ten-year government bonds will be a reference base, or benchmark, for all Estonian companies and banks that plan to issue bonds of their own. Having a risk margin on government bonds will also make pricing of these bonds simpler," Helme said.

The issue is to be organized by Citibank, Societe Generale and Nordea. The bonds are to be listed on the Dublin stock exchange to facilitate the materialization of investor interest in the instruments.  

After the planned one-billion-euro, 10-year transaction, Estonia plans to issue 1-2 more benchmark bonds in 2020-2021, it appears from the presentation of the bonds to investors. 

At the beginning of May, the Estonian government issued 6- and 12-month bonds for 375 million euros. At the end of March, Estonia signed a 750 million euro 15-year loan agreement with the Nordic Investment Bank (NIB) and has secured a 200 million financing facility loan from the Council of Europe Development Bank.