Cyprus hikes EMTN ceiling by half; tests market with long-term bond

Cyprus plans to increase the maximum amount it can borrow under its current medium term euro-denominated note (EMTN) programme to 9 bln euros from 6 bln this year, its debt chief said on Thursday.
Phaedon Kalozois said the increase did not automatically imply an EMTN issue was imminent, but said such an issue was an option for the Republic.
"An EMTN issue is an option if and when market conditions permit," Kalozois, who heads the Public Debt Management Office, said.
At present, the Republic has used about 4.72 bln euros under the EMTN programme. The needs for the current year stand at 2 bln euros, with various bonds worth 1.4 bln expiring by the end of 2011, he said.
"One of the reasons we are increasing from 6 to 9 bln is not because we will raise our issues to 9 bln, but because a small margin (to borrow) is considered a negative by investors who prefer frequent issuers," Kalozois said.
He added that Cyprus plans to issue two new five and 10-year euro-denominated bonds to local strategic investors in order to test the market. The two issues will be for 30 mln euros each and will carry a coupon rate of 5% for the 5-year and 6% for the 10-year bond.
The two bonds will be auctioned on June 6 for bidders of 500,000 euros or more and will be listed on the Cyprus Stock Exchange on June 9.
Kalozois also confirmed that another option was for a Schuldscheine, a type of debt instrument which is usually placed privately in the German market. An EMTN issue, however, was the most dominant scenario, he said. Kalozois said lead managers for a possible issue had been chosen though not formally appointed. He said that was part of regular planning by the ministry to tap any financing opportunity which may come up.
The island sold a 1 bln euro five-year bond in October, and privately placed another 145 mln euros of five-year debt in February. Kalozois said that a further 500 mln euros has been deposited with local banks.
It projects that its public debt will rise to 61.6% of GDP in 2011, from 60.9% in 2010.