Stavrakis gambles on Cyprus €1 bln eurobond

 — Roadshows start in Paris, Munich, London —

Finance Minister Charilaos Stavrakis is laying all his money on a three-day whirlwind tour of European cities to ensure that the upcoming issue of one billion euros in foreign-listed Eurobonds is a success.
Stavrakis is heading a high-level delegation that will be in Paris on Wednesday, Munich on Thursday and London on Friday where he will have to convince potential investors of the soundness of the Cyprus economy.
He announced better-than-expected growth rates of 0.8% on Friday for the third and fourth quarters of this year, up from estimates of 0.6% for both periods, due mainly to a stronger performance in both the tourism and financial services sectors, two areas that drive the Cyprus economy.
At this rate, Stavrakis hopes Cyprus will achieve an average GDP growth of 0.8% for the whole year, compared with a 1.7% contraction last year.
Government sources told the Financial Mirror that the three lead managers of the issue – Bank of Cyprus, Barclays and Societe Generale – have arranged for top rate fund managers to attend the roadshows. This will be seen as a personal success for the minister, who has so far been plagued with a slow government machine and even slower parliament that are hesitant to push through drastic public sector cuts just seven months short of the next elections.
“It’s a matter of prestige and ensuring growth and development, at a time when the international markets are not very keen on such issues,” the government source said.
Tuesday’s success by Greece to sell more than a billion euros of three-month T-bills, with yields falling more than analysts expected, is another reason for Stavrakis to be confident, he said.
Phaedon Kalozois, the director of the public debt management office told Reuters that the amount of the issue will be a benchmark size of about one billion euros, and this is expected at the end of October. The exact size of the issue will depend on market conditions, he said.
The issue will be Cyprus's second foray onto international markets to raise cash in the past 12 months, and the third in the past 18 months. It raised 1 bln euros on international markets in February with a 10-year eurobond.
Asked on the maturity of the October issue, Kalozois said: "That is subject to demand and market conditions, but we estimate the most likely to be five years."
The island's 17.2 bln euro economy contracted 1.7% in 2009 as revenue from a once-buoyant real estate sector and tourism tumbled. It emerged from recession in the first quarter, and authorities expect growth exceeding 0.8% this year.
However, it has serious problems in tackling a financing gap, expected to reach around 6.0% of GDP this year, and 5.4% in 2011, without further measures to generate revenue and trim costs.
The issue will be launched under Cyprus's Euro Medium Term Note (EMTN) programme which has a ceiling of 6.0 bln euros. It has presently used 3.55 bln euros of the facility, and will have about 1.45 bln euros left in the mechanism if this month’s issue goes ahead as planned.
Cyprus accounts for 0.2% of the euro zone's economy. It is rated Aa3 by Moody's Investors Service, AA- by Fitch Ratings and A+ by Standard and Poor's.
S&P put Cyprus on review in July for a possible downgrade unless it improved its public finances.