Marić Agrees to 2.5 Billion Euro Refinancing of Road Debt

Lauren Simmonds

The second phase of refinancing has been settled with domestic banks, and is expected to be implemented by March.

As Poslovni Dnevnik writes on the 22nd of January, 2018, the Finance Ministry, together with investment bankers Lazard Freresa as financial advisors in the road sector restructuring project, has been working for a while on the second phase of refinancing Croatia’s road debt.

After the first phase was carried out at the end of last year through Eurobonds (1.275 billion euro), the other is phase intended to be realised through domestic banks, and it is expected to be twice as big. It is estimated that in the forthcoming round of refinancing with new and cheaper debt, about 2.5 billion euro will be replaced by a total of 5.2 billion euro of the debt of the three state-owned companies from the sector (HAC, HC and ARZ).

Currency selection:

According to the current negotiating positions, it’s most likely that the refinancing operation will be completed through a club loan (club credit). According to unofficial information, it’s now up to a maturity of 3+9 years, with the first three years being a de facto ”grace period” (with only a small repayment obligation), and creditworthiness simultaneously implies a choice of currency. Bankers will say that a kuna loan isn’t realistic, and in financial circles it’s more likely to be considered a pure currency (euro) option, rather than a currency clause.

Interest rates, they say, are likely to be linked to euribor, plus the corresponding yield on the state debt, plus the premium. According to the market size of these parameters, the new loan would imply interest rates of somewhat above two percent, which is far below the interest expense level for the debt to be refinanced.

Waiting for consent:

Financers are expected to negotiate on the terms of the new financial arrangement within the next few weeks. However, given the size of the transaction, the approval of the parent banks will take some time, so it is possible that the conclusion of that deal will come only in March.

The Minister of Finance Zdravko Marić has stated in his announcements to date that this is the plan for the first quarter. In addition to the favourable financing conditions and the liquidity situation in the market, it’s fairly certain that the modernisation and restructuring of the road sector will be a major challenge. Otherwise, this project is supported by a large World Bank loan of 22 million euro.


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