articles | 28 October 2015

Cyprus creditworthiness restored

Finance Minister Harris Georgiades says the island’s creditworthiness has been essentially restoredfollowing his Ministry’s issuance of a 10-year eurobond (EMTN).

Speaking to reporters following an event at the President Palace on Tuesday night, Georgiades said, “Today (Tuesday) we have a successful 10-year bond issuance for the Republic of Cyprus. Cyprus has raised €1 billion with an interest rate of 4.25%. It is the lowest ever pricing for a 10-year bond for Cyprus.”

Back in 2013, Cyprus was hit by a severe economic crisis that involved the exposure of Cypriot banks to overleveraged local property companies, the Greek government-debt crisis and the downgrading of the government’s bond credit rating to junk status by international credit rating agencies.

Many people had seen bank deposits trimmed as part of a bail-in package to try and rescue the island while the consequential inability to refund its state expenses from the international markets and the reluctance of the government to restructure the troubled Cypriot financial sector was also to blame for the crash.

Georgiades went on to say that €450 million out of one billion euro will be immediately used to exchange bonds maturing in the period 2019-2020, while the remaining approximately €550 million will enhance the state cash reserves and will help the management of public debt for the next period, after Cyprus exits the financial support program.

“What I want to emphasise is that the creditworthiness the Republic of Cyprus has been effectively restored. I intentionally didn’t use the world “finally” because in the economy nothing is final if not supported by a coherent and credible policy”.

He added that the government will continue the policy followed over the past two years that has helped restoring the credibility of the country’s economy.

This is the third time since the start of the economic adjustment program in 2013, that Cyprus taps the markets, following an upgrade of its economy by Fitch Ratings, last Friday. Euro zone bond yields fell on Tuesday following oil prices slump.

It is also the first time since the economic crisis that Cyprus borrows from the primary market through the sale of 10-year EMTN. The ministry had also announced an invitation to holders of existing eurobonds to exchange them with the new issue of the Republic.

Source: InCyprus

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