“LARGEST ISSUANCE IN HISTORY”: Serbia borrowed three billion euros through bonds, the National Bank issued a statement!

The National Bank of Serbia announced that on Tuesday, on the international financial market, our country “for the first time in its history” realized the issuance of Eurobonds in three tranches (so-called triple tranche), selling two Eurobonds in euros and one Eurobond in dollars to international investors.

“The largest ever issuance of government Eurobonds (with a total equivalent value of about 3 billion euros) was successfully executed, and it is also the first multicurrency issuance since the escalation of the conflict in the Middle East,” they pointed out in the statement.

They also believe that “the realization of the stated transactions in just one day is a confirmation of the exceptional financial capacity that our state possesses and that investors recognize.”

Details of the issuance

Two Eurobonds in euros were issued, with maturities of five and twelve years, in the amount of 1.0 billion euros and 900 million euros, respectively.

The five-year bond was sold with a coupon rate of 4.25%, while the twelve-year Eurobond in euros was sold with a coupon rate of 4.875%.

The ten-year dollar Eurobond was realized in the amount of 1.25 billion US dollars.

“This security attracted the greatest demand from investors,” say the National Bank, stating that they submitted bids in the amount of over 3.2 billion dollars, which is two and a half times more than the sales volume.

“After the issuance of the dollar Eurobond, the Republic of Serbia, very responsibly, using instruments for protection against currency risk (currency swap), switched (swapped) the obligations in US dollars into euros, which will achieve savings in interest costs, given that a coupon rate in euros of 4.66% was achieved,” they emphasize in the statement.

Governor Jorgovanka Tabaković stated on this occasion that, taking into account global geopolitical circumstances, the stated transactions are “of huge importance and represent another confirmation that international investors recognize our country as a safe investment destination, regardless of the global systemic risks overflowing from the external environment.”

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What will the money be used for?

Minister of Finance Siniša Mali announced that the first tranche of bonds, in the amount of one billion euros, with a maturity in 2031 and a coupon rate of 4.25%, will be used for the early buyback of bonds maturing next year.

The second tranche, in the amount of 900 million euros, with a maturity in 2038 and a coupon rate of 4.875%, represents, as he stated, another in a series of “green” bonds of Serbia.

“The funds collected by this issuance will be used exclusively for financing green projects, such as the improvement of railway infrastructure, the procurement of trains, the Belgrade metro project, and more,” announced Mali.

The rest of the collected funds through the third tranche will also be used for major capital projects within the national strategy “Serbia 2030,” pointed out the first vice president of the Government.

When it comes to the last tranche in the amount of 1.25 billion dollars, it matures in 2036.

“Following the policy of active public debt management, the Ministry of Finance today realized a financial hedging operation, whereby it replaced the dollar coupon rate with a coupon rate in euros of 4.66%,” stated Mali.

“By the early buyback of bonds maturing in 2027, we are actively managing public debt and further strengthening the stability of public finances. Furthermore, we are not stopping with projects for the country’s development because they bring even more new jobs and further GDP growth. We are particularly committed to investments in ‘green’ projects that encourage sustainable and inclusive economic growth,” Mali concluded.

Level of public debt

The issuance is, as he pointed out, in accordance with the planned dynamics of financing large infrastructure projects in Serbia, and also in accordance with the projection of public debt, which for the end of this year amounts to 44.5%.

“Our projection will be respected. We strictly take care of the level of public debt because the stability of public finances is necessary for us in the current global crises. At the end of February, our public debt amounted to 41.5% of GDP, which is twice as low compared to the public debt of the eurozone, which moves at a level of about 89%,” Mali pointed out in the statement.