Thursday, 11 October 2012 01:12
RABAT: Morocco has delayed its maiden dollar bond sale to end-November pending market stability, the budget minister said in published remarks on Wednesday, but banks have already been mandated for an issue that may exceed the initial $1 billion mark.
The delay's announcement, carried by L'Economiste newspaper, comes amid speculation King Mohammed would soon make a rare official tour of the Gulf Arab region from where Rabat hopes to raise a substantial share of the issue.
Initially estimated at $700 million-$1 billion, the cash-strapped country now says it may go for more.
"It (size of the issue) will depend on the kind of offer we will be getting from investors," the newspaper quoted Idriss Azami al-Idrissi as saying. He added that leads for the issue have already been mandated, but declined to name them.
The minister and his aides could not immediately be reached for a comment. Earlier this month, the central bank governor hinted at a possible delay of the issue which he said would have a "medium-term" maturity.
Morocco said in August it planned to sell the bond in October, shortly after securing a $6.2 billion precautionary credit line from the International Monetary Fund.
This is the first time that Morocco, a relative newcomer to the international sovereign bond market, seriously considers a greenback-denominated issue.
Its dirham currency, while not convertible, is pegged to a basket of currencies in which the euro accounts for 80 percent of the total weighting and the dollar for 20 percent. The breakdown reflects Morocco's trade exchanges.
Its fiscal and current account deficits surged last year to their highest levels in many years. A continued rise in the trade deficit this year exacerbated a chronic shortage in liquidity in a domestic market that is the state's biggest creditor.
The issue should help Rabat bridge a delay in delivering this year's budgeted public investment and replenish dwindling hard currency reserves as it braces for one of its biggest grain import campaigns in 30 years due to bad weather last year.
Debt analysts said the delay may cause interbank rates to tighten slightly amid a growing liquidity shortage. But they expressed more concern about its impact on public finances, weakened mainly by high spending.
"It (the issue) accounts for less than 10 percent the deficit in domestic liquidity. But it will add around 6 percent to forex reserves and help the state implement the 2012 budget," said a Casablanca-based analyst.
By end-September, the state used up 91 percent the 46.5 billion dirhams budgeted for subsidies in 2012 while only half budgeted public investment were delivered.
The $90-billion economy is heavily anchored to the euro zone whose troubles have hit tourism revenues, migrant transfers and foreign investment this year.
In its most recent international bond sale, Rabat raised about 1 billion euros in 2010 after 500 million euros from a similar issue in 2007. Both issues had a ten-year maturity.
Western diplomats said Moroccan ruler King Mohammed plans to make a rare official tour soon of oil-exporting Arab countries to seal a partnership with the six-nation Gulf Cooperation Council (GCC) and attract badly-needed investment.
Sources familiar with the pending bond issue have told Reuters that around half may be allocated to institutional investors from Gulf Arab countries.
In July, King Mohammed urged his government to tap financing from Gulf Arab sovereign wealth funds to help with projects Morocco hopes will help it meet pressing social needs, in what was seen as an important policy shift for the monarch.
Copyright Reuters, 2012