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
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
10 Reasons to buy an apartment in the suburbs
There is a tendency for Tbilisi dwellers to move from central parts of the capital to the suburbs.
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
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
July 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
29 30 31