Slovenia returned to international bond markets on Thursday in search of cash needed to recapitalise its banks and stave off a bailout, resuming a bond issue it had aborted two days ago after Moody's downgraded it to junk. The Thomson Reuters market service IFR said the small euro zone member had received more than $16 billion worth of orders for a dual-tranche US dollar issue.
The country started marketing the deal at a slightly higher premium than initially intended, following a delay prompted by Moody's two-notch rating cut on Tuesday. The final size of the transaction will be confirmed later on Thursday but Slovenia has announced that it is seeking to raise up to $3.5 billion through the sale of 5- and 10-year bonds.
It has revised yield guidance on a $1 billion five-year tranche to 4.95%-5.05% from the 5.125% area and on a 10-year tranche of up to $2.5 billion to 6%-6.125% from the 6.25% area. Both tranches are expected to price in range. The month-old coalition government of the tiny Alpine country of two million is struggling to avoid becoming another euro zone state in need of a bailout because of its weak banks, a rising budget gap and a declining economy.
A successful bond sale could prove a mixed blessing as it may actually reduce the pressure on Prime Minister Alenka Bratusek's government to enforce reforms quickly. Bratusek will unveil her 'stability programme' on May 9, which will then be reviewed by the European Commission.
"While a successful bond issue would help meet the financial needs this year, Slovenia will face a challenging year in 2014 in terms of further borrowing," said Otilia Simkova, an analyst at Eurasia group.
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