Bloomberg News

Slovakia to Sell Benchmark Bond Issue in Euros, Ardal Says

January 12, 2012

(Updates with new price guidance in second paragraph.)

Jan. 11 (Bloomberg) -- The Slovak Republic began selling a new benchmark issue of bonds in euros, the first international offer of debt securities since April, bankers involved in the transaction said.

The bonds will have a maturity of five years and may be priced to yield 305 to 310 basis points more than the benchmark mid-swap rate, a banker involved in the transaction said. The country’s state-debt agency known also as Ardal didn’t specify the terms of the transaction in an e-mailed statement from Bratislava, Slovakia, today.

The east European country, which adopted the euro three years ago, is approaching international investors after domestic bond auctions in the fourth quarter failed to generate enough demand. As much as 5.65 billion euros ($7.18 billion) in Slovak debt securities mature this year, of which 4.98 billion euros is due in the first quarter, according to data compiled by Bloomberg.

“Given the amount maturing in the coming months, such a move is inevitable,” said Maria Valachyova, an economist at Slovenska Sporitelna AS in Bratislava. “Demand is hard to predict, since the perception of Slovakia has been hurt by the euro-region’s problems.”

German Spread

Slovakia is rated A1 by Moody’s Investors Service and A+ by Standard and Poor’s, better than Italy, a euro-area founding member. The country last tapped international markets in April, when it sold 1 billion euros in reopening of bonds maturing 2020. The bond is trading to yield 5.461 percent, or 3.89 percentage points more than German securities with a similar maturity.

Ardal failed to raise the planned amount in bond sales last quarter as the euro-region’s debt crisis has reduced investors’ interest in long-term instruments, which prompted the agency to sell bills instead. Two days ago, it sold 237.1 million euros in 77-day Treasury bills yielding 1.4313 percent.

Slovakia hired HSBC Holdings Plc., Societe Generale SA, Tatra Banka AS and UniCredit SpA to manage the benchmark bond issue, which will take place when market conditions allow, Ardal said.

The country is ruled by an interim government of Iveta Radicova before early elections are held on March 10. The administration targets a budget deficit of 4.6 percent of gross domestic product in 2012, down from a projected 4.9 percent for 2011.

--Editors: Douglas Lytle, Peter Branton

To contact the reporters on this story: Hannah Benjamin in London at hbenjamin1@bloomberg.net; Radoslav Tomek in Bratislava at rtomek@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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