Nicosia, October 22, 2015/Independent Balkan News Agency
Cyprus is planning to return to the markets for the third time during the country`s bailout programme in about three weeks or until November 15, while it awaits on Friday an upgrade of its creditworthiness by Fitch rating agency.
Fitch is expected to upgraded tomorrow the credit rating of the Republic to BB-, from B- in April 2015, following a decision by Standard and Poor`s that upgraded Cyprus` creditworthiness to BB- on September 25.
As competent sources of the Ministry of Finance said, it will be the first time since the financial crisis that Cyprus will borrow from the primary market through the sale of European medium-term (EMTN) bond with duration over seven years, namely from 7.5 to 10 years.
The amount of the issue will be decided at the last moment, but is expected to be more than 500 million euros and less than one billion. The interest rate will also be decided at the last moment.
The sources also said that there was a great interest in Cyprus` Roadshow abroad (London, Paris, Frankfurt and Munich) attended by a total of 35 major investors, of which 22 in London and seven in Germany. The consultants of the Ministry are Barclays, Goldman Sachs International, HSBC and Nomura.
The goal of the Ministry of Finance, according to the medium-term public debt management strategy for 2015-2019 set by the Finance Ministry and the relevant department of the International Monetary Fund, which has no connection with the Troika, is to tap the markets in 2015 and 2016, despite the fact that the financing needs of the Republic are covered for two years. The objective is to ensure the early coverage of the financial needs of the Republic at the lowest possible cost in the medium term, within an acceptable level of risk.
The main objective of medium-term public debt management strategy for 2015-2019, are inter alia, the regular presence of the Republic in the markets, the smoothing of the temporal structure of debt maturities so that the debt maturity is not concentrated in specific years, the reduction of interest rate risk and the accumulation of minimum adequate reserve of cash necessary for treatment periods of uncertainty worldwide.
The Government, according to the same sources, has a reserve with significant liquidity amounting to 11% of GDP or almost 2 billion euros some of which will use to repay an EMTN bond amounting to one billion euro, expiring on 1 November 2015.
The aim of the Finance Ministry, according to the sources, is now the “clean exit” from the memorandum which means that the Republic will stop financing its needs from the support program and will only borrow from the markets.
Cyprus will still absorb 600 million euros by the end of the financial assistance program in March 2016, bringing total lending by the Troika to 7.7 billion euros from 7.1 billion euros today. The remaining 2.3 billion euro from the program of 10 billion euro will not be used.