New Eurobond emission, new puzzles
14 April, 2011
New Eurobond emission, new puzzles

Georgia took its second sovereign Eurobond emission of USD 500 million and 10-year maturity to refinance similar volume of its existing five-year emission allocated in 2008 at London Stock Exchange. Part of economic analysts approves the deal as an inevitable remedy to pay off the first Eurobond emission that expires in 2013. Some analysts argue that Georgia should stop practicing sovereign loan emission with the purpose of covering another loan.

On April 7, 2011, Georgia successfully priced a new 10-year USD

500 million sovereign Eurobonds transaction and in parallel redeemed USD 417 million of its existing USD 500 million 7.50% bond due by 2013 through“any and all” cash tender. Ultimately 83% of investors replaced the old 5-year Eurobonds by the new 10-year benchmark offering 7.125% of interest rate.
A carefully implemented 3-days multi-team roadshow strategy, covering San Francisco, Los Angeles, Boston, New York, London, Frankfurt, Munich, Geneva, and Zurich, highlighted Georgia’s strong credit momentum and attracted numerous new institutional investors, Ministry of Finances of Georgia (MOF), informed Georgian Journal.
According to MOF, the achieved pricing level is also materially inside of other similarly rated sovereign issuance from the region. S&P’s and Fitch’s decisions to upgrade Georgia’s credit rating outlooks to ‘positive’ from ‘negative’ in March helped highlight the country’s positive credit momentum ahead of the deal announcement.
Governmental standpoint is that the newly taken sovereign Eurobond emission will not be spent on financing the state budgetary expenses unlike the first emission of 2008 that financed budgetary expenses targeted at handling with the war-inflicted results after Russia routed Georgia in August of 2008. 
This emission was a subject of severe criticism for Georgia had a budgetary surplus in 2008 and no economic analyst recommended to take a sovereign loan without grounded economic reasons and calculations for government did not provide with detailed description where the loan was supposed to go. And it vanished in consequence. No transparent accounts of the questioned loan expenses were presented to publicity up to date and economic analysts find suspicious both spending and economic benefit of the USD 500 million worth loan requiring roughly USD 36 million as an interest pay per year. Economic analysts warned then that Georgia could not pay off the loan without taking another loan.
But government assures it can easily cover the loan even at the instant from its free deposits. Kakha Baindurashvili, Minster of Finances of Georgia, during his meeting with Georgian businessmen in this past February reported that government has about GEL 1 billion [about USD 625 million] in the state treasury but government takes a new loan for raising awareness of the country at international market and keeping a new benchmark that opens up new and better credit opportunities to Georgian banks and business at international market.
Levan Kalandadze, an economic analyst, believes this kind of argumentation is a mug’s game. “It’s nonsense to take a loan for fixing a new benchmark that allegedly easies life to commercial sector. All investors know that you take a loan not for financing economic projects but for covering another loan.  It would have made greater effect on international investors if Georgia would have covered the USD 500 million worth loan this year since there is sufficient money in the state treasury, and took a new loan for fianancing economic activity rather than cover loans by loans,” he explained to GJ.
|Kalandadze believes Georgia must stop this vicious practice of converge loans by new loans that may lead to irretrievable results.
“I greet Eurobonds emission if it would be targeted on financing economic projects that could boost economic development of the country, but I hate this trend to take a new loan to pay off old obligations. Ok, assume we redeemed payment of this first USD 500 million emission by 2020 by this new 10-year emission, how can we cover this in 2020 by another loan? It may never end. Plus we have to pay about USD 36 million per year as an interest per year that makes USD 360 million by 2020, and for what?” He asked GJ.
Besides Kalandadze fears the law prohibiting spending of the new loan on budgetary expenses can really prevent unreasonable squander.
“Since the money will be accumulated in the state treasury who can outline which is the loan-based and which one is not, nobody will be able to control where the treasury-based money will go in fact,” he said.
Levan Surguladze, Head of Caucasus Financial Service, approves governmental initiative to issue Eurobonds to keep a benchmark at international market and finds the recent transaction quite successful.
“This is excellent that we have two benchmarks now at international market. Georgia had to take this new loan for the benchmark sake even if it really was able to pay off the old loan… Besides loan terms are very good: we took the 10-year loan for 7.1% while the earlier 5-year loan fixes 7.5%. Longer loans are riskier and given for higher interest rate usually. This means the interests was high and the country had better assessment than expected,” he said.


Other Stories
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
February 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28