Lithuanian bond a smashing success

  • 2003-02-27

In a major sign of trust to the nation's economy, investors oversubscribed a 400-million-euro issuance of Eurobonds on Feb. 20, allowing the Lithuanian Finance Ministry to borrow on international capital markets at a record-low rate.

The ministry said that 400 million euros (1.38 billion litas) in 10-year bonds were placed at an annual rate of 4.5 percent, considerably lower than the first 10-year bond issue in 2002, when Lithuania had to borrow from international investors at 5.87 percent.

"The record low interest rate and great demand for the bonds in international markets demonstrate three things: investors' attitude towards Lithuania, which has been formed by the country's consistent fiscal policy, a steadily improving reliability of our economy and, of course, a well-chosen borrowing strategy and tactics," the Finance Ministry said in a statement.

The issue was heavily oversubscribed, according to the ministry, with investors making offers of up to 800 million euros.

Interest was strongest among German and Austrian investors, who bought up 45 percent of the bonds, followed by French and British investors, who purchased 12 percent each.

Another 6 percent originated in the Netherlands and 2 percent from Asia.

The issue comes just days after Standard & Poor's upgraded Lithuania's long- and short-term rating of debt issued in foreign currencies. As the agency said Feb. 17 in a statement: "The upgrade reflects Lithuania's progress in consolidating public finances and its very healthy economic growth."

Lithuania is the first and so far the only country in the Baltic region to place 10-year securities on intentional markets. It placed a 7-year issue worth 200 million euros in 2001 at an average annual yield of 6.62 percent.

The latest Eurobond issue was handled by France's BNP Paribas and Germany's Dresdner Kleinwort Wasserstein.

Proceeds will be used to redeem previous Eurobond issues and cover the budget deficit.