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Cyprus prepares to tap international markets after early repayments

Cyprus prepares to tap the markets with a new euro-denominated bond issue, the finance ministry has said.

In a statement the ministry said “the Republic of Cyprus, rated BBB- (stable) by Standard and Poor`s, Ba2 (stable) by Moody`s, BBB- (stable) by Fitch and BBBL (stable) by DBRS, has mandated CITI, Goldman Sachs International and HSBC to arrange a series of fixed income investor meetings”.

“A EUR-denominated Reg S only (registered form) transaction is expected to follow subject to market conditions,” the MoF said.
Roadshows will be held between February 11 and 13 in London, Paris, Munich and Milan.

Cyprus will seek to exploit the current momentum on fixed income assets, as the accommodative monetary policy by Central Banks continues on the backdrop of upbeat investor appetite as shown by interest concerning bond issues such as Italy, Spain and Greece. Furthermore, Cyprus planned market exit follows a series of early repayments in late 2018 utilising its cash reserves.

According to data gathered by CNA, the MoF repaid fully the loan to the Central Bank of Cyprus (CBC) and the loan to the former state-owned Cyprus Cooperative Bank (CCB) totalling €0.8 billion. Accounting for the scheduled repayment of a bond issued to the CCB amounting €0.5 billion, total payments in the last months of 2018 amounted to €1.3 billion.

The Mof repaid the loans to the CBC and the CCB in a bid to offset the deterioration of the island’s public debt which in 2018 spiked to €22.64 billion or 111 per cent of GDP as the government issued domestic bonds amounting to €3.2 billion to facilitate the sale of the performing operations of the CCB to Hellenic Bank.

The forthcoming issue will be utilised to cover Cyprus’ refinancing needs for 2019, with the Public Debt Management Office targeting covering financing needs for the next nine months. The state’s cash reserves in end-2018 amounted to €1.38 billion.

Last September, following the upgrade of Cyprus’s long-term rating to the investment grade by Standard and Poor’s, it issued an €1.5 billion EMTN bond, the largest ever euro-denominated bond with a coupon of 2.3 per cent representing the lowest ever coupon in the international capital markets.

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