Croatia Issues 11-year €2 bn Bond

Total Croatia News



ZAGREB, June 11, 2020- The Finance Ministry on Wednesday issued an 11-year €2 billion bonds on the international capital market at 1.5% interest and 1.643% yield, the ministry said in a press release on Thursday.

The issue was arranged by Banca IMI/Privredna Banka Zagreb, Barclays, Deutsche Bank, and J.P. Morgan.

The transaction was announced on Tuesday, after which the ministry held a global teleconference to prepare the broadest market possible.

The investment community’s interest was exceptional, with more than 400 potential investors, which was helped by investors who invest only in investment credit rating securities.

Investors were from the UK, the US, Germany, Italy, Austria, France, Benelux as well as Central and Eastern European countries. Strong demand was generated in the amount of €8.45 billion, about 4.2 times more than the nominal amount of the issue.

This enabled Croatia to make the latest borrowing 45 basis points below the initially published price, the ministry said.

The revenue from the issue will be used to refinance a US$ 1.25 billion euro bond due in July. Nearly HRK 360 million will be saved on interest annually.

The rest of the issue will be used to finance government aid for businesses affected by the COVID-19 pandemic, as envisaged in the revised 2020 budget in early May. In it, revenues from financial assets and borrowing increased from HRK 30.5 billion to HRK 63.4 billion. Until then, HRK 35.6 billion of that amount was already covered.

In February, the government issued three bond tranches in the amount of HRK 15 billion at 1% interest. In early May, it issued a seven-year bond on the domestic market amounting to €1.445 billion and refinanced an HRK 7.8 billion treasury note as well as making loan arrangements with banks in Croatia.

Credit agencies say the shock will be temporary

The ministry said the latest transaction came in the week after Fitch affirmed Croatia’s BBB- rating with a stable outlook.

The stable outlook reflects the confidence that Croatia will maintain medium-term fiscal stability, while at the same time extending short term support for the fight against the COVID-19 pandemic. In May, Standard & Poor’s affirmed Croatia’s BBB-/A-3 rating with a stable outlook, while Moody’s affirmed the Ba2 rating with a positive outlook, the ministry said.

The agencies say the pandemic will weaken Croatia’s economic and fiscal results this year, but that the shock will be temporary and that previous fiscal data improvements and the stronger economy support the country’s credit profile, the ministry added.

The final conditions of the issue and the level of interest once again confirmed Croatia’s strong status as an attractive issuer on the international capital market, it concluded.


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