Georgia has to pay off a loan of $ 500 million in five days

Georgia has to pay off a loan of $ 500 million in five days

access_time2021-04-07 14:15:43

On April 12, 2021, the deadline for repayment of 10-year Eurobonds in the amount of $ 500 million expires.


The bonds were placed on the international market in 2011, with the aim of refinancing bonds taken by the government in 2008. the time has come for covering this debt that will be refinanced with new bonds.


On February 26, 2021, the Ministry of Finance instructed investment banks to start issuing Eurobonds. To sell them, 10 international investment banks and funds were selected, including leaders of the global stock market as JP Morgan, Goldman Sachs and ICBC.


The Ministry of Finance also intends to put the bonds up for sale on the domestic market and involve Georgian investment companies Galt & Taggart and TBC Capital.


At this stage, work is underway to place bonds on international stock exchanges and, according to available unofficial data, a special statement will be made in the coming days.


 New bonds are issued for a period of 10 years, but this is only preliminary data - the final parameters depend on the market situation and the demand among potential clients. The maturity of the bonds can be less than 10 years.


But  the interest rate will also be significantly lower than it was in 2008 and 2011.


Mary Chachanidze, Managing Director at Galt & Taggart, says that according to preliminary calculations, the interest rate on bonds will be 4% per year, but this is not a final decision yet.


According to the opposition member, ex-president of the National Bank of Georgia Roman Gotsiridze, work on the issue of new Eurobonds began with a delay, and most likely the Ministry of Finance will not have time to take out the securities in time, to get a yield, and fulfill obligations to investors in a timely manner.


The ex-official believes that in the current situation the government will have no choice but to cover the 500 million debt from the central bank’s reserves.


“This will significantly cut the currency reserves of the National Bank against the backdrop when  the external debt has reached a historical maximum. The regulator tries to avoid foreign exchange interventions to keep the national currency rate, but now it will have to spend 500 million to pay off debt on Eurobonds. The foreign exchange reserves that have been accumulating over the years will be cut by $ 500 million in just a couple of days, ”Roman Gotsiridze says.


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