Amount: $759m exchange offer
Maturity: February 15, 2015
Issue price: 102.75
Launched: Thursday September 26
Joint books: Citigroup/SSSB, JP Morgan
Citigroup/SSSB- The swap went remarkably well, especially given the market volatility. The Bulgarians had parliamentary approval to swap a maximum of $800m, so getting to this level and achieving the key benchmarking, duration extension and debt reduction objectives was quite a success.
Comparing the dollar 2015 and the euro 2013, it was quite clear that the 2015 had performed relatively better over the summer, supported by its smaller size and the growing shift in the dollar sector towards safer sovereign credits.
Looking at the euro 2013 from the perspective of the Bulgarians' debt repayment schedule, it also seems that tapping it again could create a bit of a repayment hump. Now the 2015 has reached benchmark size.
At the beginning of the year Bulgaria had approximately $4.7bn of outstanding Brady bonds. As a result of this transaction and the earlier swap in March this has been reduced to around $2.5bn. It is a great result for Bulgaria to have taken out almost 50% of its Bradys, achieved significant cost savings and established benchmark bonds in both dollar and euros in only a matter of months.
JP Morgan - This was a follow-up to the last transaction in March, which was pretty complex. It made sense to do it now, because some investors had some Bradys left over from the initial deal which they did not offer to swap at the prices on offer at the time. It was a useful time to go back to the market and add liquidity to the 2015 dollar bond.
We thought about the timing carefully. We wanted to do it before the elections in Brazil, because it is still not clear what the outcome there will be.
This time, the swap was fairly heavily targeted. We had a good idea from the original deal about the specific investors who had not participated. The roadshow consisted of one-on-one meetings and some conference calls with European bondholders.
We tried to make sure of two things. Firstly, that investors understood the Bulgarian credit story and its improving fundamentals. Secondly, we talked through the transaction with investors and made sure they were comfortable with the 2015 structure.
The 2015 bond is trading at around 102.25/102.75, having been launched. We launched this second deal at 102.75.
Bulgaria has done three international bond issues and proved itself to be an agile borrower. The sovereign has reprofiled its debt structure exceedingly well.
The Brady Flirbs are now trading a 90.75, as are the Discs, while the IABs are at 89, so they are a little lower than the levels investors swapped them at.
There is a subset of investors that is still comfortable holding Bradys and so we do not expect to see any more swaps. The 2015 bond is now at $1.1bn, which gives it substantial liquidity.