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CYPRUS: Two new EMTN issues in 2015

07 January, 2015

 * Gov’t needs to raise €2.9 bln *


The government is planning two new international debt issues this year, with Finance Minister Haris Georghiades saying on Monday that the aim this year is to refinance some 2.9 bln euros of debt.



Georghiades told Reuters the government is preparing for two issues under its European Medium Term Note (EMTN) programme, having successfully tapped international markets last June with a 750 mln euro issue taken under the same programme.
“Cyprus is implementing an ambitious programme of economic reform and consolidation which is already delivering early and tangible results. On such sound foundations we are aiming to re-establish sustainable market access,” the Finance Minister.
Georghiades told Reuters that the upcoming debt issues would not substitute but will complement existing financing from lenders.
Meanwhile, financial news site Stockwatch said that the government faces considerable pressure to refinance a large pile of debt in an increasingly volatile environment and amid the mounting tensions with its official creditors.
A total of 83 mln euros in bonds expires in January and a further 58 mln by the end of February.
An additional amount of 567 mln in treasury bills is due to expire at the end of March raising the total for the first quarter to 708 mln euros.
Over the past few days, the government proceeded to new treasury bill offerings raising 218 mln euros, while another 71 mln was raised in the fourth quarter of 2014 through the issue of 6-year retail bonds, mostly to international investors.
In December, another 350 mln euros flowed into the government's treasury from the European Stability Mechanism, which has since been frozen due to disagreements over the postponement of the foreclosures bill. However, the IMF suspended its share of the bailout money, amounting to 86 mln euros, following the about-turn by parliament.
After a relatively manageable second quarter during which 149 mln euros of issues are expiring, the government will face a very difficult third quarter during which a total of 1.12 bln euros will expire mainly due to a large bond issue of 1.091 bln expiring on July 1.
The government hopes that through the ongoing implementation of the necessary reforms regarding public finances, it will be in a position to sustain and extend its current fiscal surplus that will facilitate part of the upcoming financing needs.
The last quarter of this year will call for an additional 927 mln euros in expirations mainly due to an EMTN of 863 mln euros expiring on November 1, exerting further pressure on the government. However, by that time, the Anastasiades administration should have the initial report on the privatisation of the telecoms company Cyta as part of a wider four-year plan to raise some 1.4 bln euros from the sale of state-assets.
In early December, the ministry of finance also embarked on a road show in order to explore foreign investors' interest in potential Cyprus new debt.
In spite of some negative developments that occurred since then, the 10-year Cyprus government yield remains at about 5%.
The government has already borrowed around 6 bln euros from its Eurozone partners and the IMF as part of the 10 bln bailout programme with an interest rate of about 1%.
Given the current problems with its creditors, it is uncertain how the government will go about borrowing the remaining 4 bln euros for the adjustment programme.
The government maintains a cash reserve which could prove instrumental should the current problems with the international creditors persist. It wishes to expand this reserve in view of the large expirations coming in the following years especially after the end of the programme in March 2016.
At the end of November, official data showed that there were savings worth 456 mln euros in the public coffers.