TALLINN - Tallinn's risk management committee will suggest that the city choose Bank Austria as the provider of a 450 million kroon (28.7 million euro) loan that the cash-strapped city is planning to take this year.
Bank Austria offered to issue bonds with an annual interest of Euribor plus 0.25 percent.
The terms of the bond issue offered by Bank Austria were the most favorable of the five offers selected by the city's risk managers.
Silver Tamm, chief specialist at the city's treasury department, said the debt instrument would be a closed bond issue with a maturity of 10 years and a three-year period of grace before repayment of the principal starts.
Having sent out invitations to 21 financial institutions, the city of Tallinn received initial bids from 13, which was then narrowed down to five: NIB, a syndicated loan offer by West LB, the Bank Austria bond offer, a bond by Dexia and a loan offer by Depfa.
Under the approved budget, Tallinn will take additionally a loan worth 450 million kroons this year. As a result, the loan burden of the capital will rise to 56 percent of annual budgetary revenue, or close to the 60 percent maximum limit permitted by law.
Beginning in 1999, Tallinn has taken five large loans, and repayment on most of them is continuing. Bonds issued in 1999 will mature later this year, and two of the loans have been repaid.