Cash-stripped Balkan states tap international markets

After Croatia launched a new seven-year Eurobond on Thursday, the first in two years, other Balkan countries also plan to tap international markets this or the next year to raise cash for their financing needs.
After a slow recovery from recession that hit the countries of the western Balkans in 2009, the increased need for cash to fill in budget deficits and service due debt has prompted many states to borrow on foreign markets.
"These countries have limited domestic savings and international markets seem as most viable option for them," said Milan Cuc, an IMF resident representative in Bosnia. Croatia launched its new seven-year Eurobond at 300 basis points over mid swaps, Thomson Reuters service IFR reported on Thursday. The sale, the country's second tapping of foreign markets this year after a March issue worth $1.5 billion in the United States, was worth 750 million euros.
Serbia and Macedonia have announced they may issue Eurobonds in the autumn to cover their budget deficits set at 4.1 percent and 2.5 percent of the gross domestic product respectively, and Montenegro and Kosovo plan such issues for the next year.
Bond analysts say the time is right for emerging Balkans to tap international markets because after Greece they may become considerably more expensive from the perspective of issuers.
"An old English saying 'make hay while the sun shines' sums up bond issuance in the Balkan at the moment," said Gabriel Sterne, a senior economist at London-based Exotix Limited. "Yields are tight, and good value for issuers. I think markets are focusing on the regions' achievements in emerging from the global financial crisis and getting closer to EU accession and the umbrella that would provide," Sterne said.
Croatia, which concluded EU entry talks on Thursday and still hopes to become a member in 2013, targets a general budget gap this year of 5.1 percent of gross domestic product and needs some 28 billion Croatian kuna ($5.42 billion) to cover the deficit and service outstanding debt.
A market rumor has it that the government would in July issue a domestic bond worth up to 5 billion kuna. Macedonia announced last week it might issue Eurobond by the end of the year if conditions on the market are favourable. The government has earlier put a size of the bond at between 200 million and 250 million euros.
Serbia, the largest market in the region, has said it was planning to issue 700 million euros in eurobonds this year after its planned sale of the state-owned Telekom Srbije had failed.
Montenegro sold a five-year eurobond issue worth 180 million euros ($259.2 million) in April, after sucessfully selling the entire tranche of its debut five-year Eurobond worth 200 million euro last September.