On the political closeness between the Basescu and Obama administrations and Americans’ interest in Romania, the ministry is likely to raise over $2 billion from Wall Street.
Bogdan Dragoi, Treasury head and the government’s number one in the relationship with bankers and foreign investors, announced the intention in early summer, and now the Finance Ministry is selecting the lawyers who will assist the state in the possible sale. The deadline for the filing of bids is September 6.
From the onset of the crisis, the government has mainly counted on international financial groups with domestic operations to fund its deficit, namely around EUR20 billion in three years. The groups are already overloaded with Romanian bonds and the ministry needs to diversify its investor portfolio, so as not to be dependent on a small group and for the groups to cut pressure and risks.
To secure a multiannual program for the sale of government bonds abroad and expand maturities, the ministry hired the investment banking arms of SocGen and Erste, also the biggest investors in Romanian government bonds, to draw up a plan. The program started in July, when the ministry raised EUR1.5 billion from the European market paying 5.25% a year. The next step would be the U.S. market, where the ministry may sell over $2 billion, at an interest rate of around 4-5%.
Erste and SocGen must also find a partner U.S. investment bank to place the Romanian bonds. Except for an operation the Romanian central bank carried out on the American market 15 years ago, when it placed $50 million, Romania has not been present on the world’s most powerful and liquid financial market.
As it needs to borrow around EUR10 billion each year, in lei and foreign currency, to fund its deficit and pay previous debts, the Finance Ministry has to diversify its portfolio of external investors and maturities, so that it may ease pressure on international financial groups with Romanian operations and not absorb so many lei from the domestic market.
Given external market tensions, the ministry needs financial buffers to avoid the situation that occurred in 2009, when financial resources were extremely scarce and it had to resort to the IMF, the European Commission and the World Bank for the biggest loan in Romania’s history, of almost EUR20 billion.
(English version by Catalina Apostoiu; Editing by Oana Gavrila)