Lithuania benefits from easing global financial crisis

  • 2007-10-24
  • Staff and wire reports
VILNIUS - Lithuania's government successfully placed a new 600 million euro 10-year Eurobond issue on international markets on Oct. 17. The issue, which bears an annual coupon rate of 4.85 percent, was over-subscribed with demand reaching 2.5 billion euros, the Finance Ministry reported.
Investors included fund managers, pension funds, insurers and central banks in the European investor community with Germany taking the biggest chunk, a 30 percent allocation, and France the second largest subscriber at 21 percent of the total, said the Ministry.

"Investors say the deal from the new European Union member is interesting to convergence funds, which are hoping for a small yield pickup over eurozone Bunds," noted Reuters news agency. Convergence fund investors focus on countries that have recently joined the European Union.
The cabinet earlier planned to place a 650 million euro issue in mid-September, however, the issue was postponed amid unfavorable developments on the global markets.
In a sign of improvement in the international financial markets after the recent turmoil, Reuters reports that "a flurry of new emerging market bond issues were launched Oct. 17 and that investors believe ample liquidity and generous yield premiums will guarantee solid performance."
Besides the Lithuanian bond, the news agency reported that Russia's Gazprom placed a new 10-year euro bond, Sri Lanka issued a 5-year debut dollar issue, and Mexico's Pemex brought to market a 10-year note, as all were competing for investor attention.

The Lithuanian issue was lead managed by UBS Investment Bank and Societe Generale. The government plans to use the funds raised for the redemption of maturing securities, loan refinancing and budget deficit coverage.
International rating's agency Fitch has assigned the issue an "A" rating, which is in line with Lithuania's 'A' Long-term foreign currency 'Issuer Default Rating.' 
Lithuania, with its strong credit rating upgraded last year, is benefiting from lower borrowing costs, as can be seen in this bond's interest rates compared with two previous bond issues, placed in 2002 and 2006, where the government is now paying a 5.875 percent annual coupon on 1 billion euros in loans.