$1 billion Eurobond swap
by Central Bank

An initiative to avoid the country’s default

and protect the banking sector

The Central Bank (BDL) will swap due Eurobonds, worth $1 billion, by the issuing 10 and 15 year term Certificates of Deposit (CDs). The closing of subscription to the first swap of $500 million due for June is today, while the closing of subscription to the second swap of $500 million is due August 6.

“BDL is again taking the initiative of finding the right solution to the State’s financial duties, in the light of the absence of any law that allows the issuing of Eurobonds,” said Joe Sarrouh, Advisor to the Chairman of Fransabank. “The country will be avoiding a lack of default and banks will be protected by investing their liquidity with BDL,” he said.

The remaining balance of the last law issued by Parliament in November 2014, which allows the Government to issue Eurobonds of $2.5 billion, is estimated at around $300 million. This amount is not enough to cover the due Eurobonds of $1 billion.

The issuance of any new Eurobonds is subject to the approval by Parliament of a law allowing the Ministry of Finance (MoF) to undertake such a process. Market reports said that the MoF was pushing, in recent weeks, the issuance of the law, but without any tangible results.

Interest rates on the 10-year CDs stand at 6.04 percent and 6.50 percent for 15-year CDs. “Banks should have an interest in subscribing to the CDs, as they have close interest rate yields to Eurobonds,” said Sarrouh.

The contribution of foreign financial institutions to the latest $2.2 Eurobond issuing in February was 15 percent. Sarrouh said that “foreigners have been showing great interest lately in investing in the Government’s bonds. The current price of issued CDs is good for them, still we have to wait for their reactions,” he said.