Narrowing the field for borrowing

Belarusbank delayed the allocation of Eurobonds, scheduled previously for the second quarter of 2011, said the Chairperson of this state-owned bank Nadezhda Ermakova.

“Floatation was carried over. Life will show until when”, she said, adding that “proper conditions have not yet been created for it”. Previous plan of the Belarusbank was to place $ 500 million worth of Eurobonds in the II quarter of 2011.

Comment

The refusal of the State Bank to place Eurobonds could be due to the extremely high cost of such borrowing. In consideration of the paralysis of the foreign exchange market and down rating of the sovereign rating of banks, state eurobonds yielded on the collateral market in March up to 12%, while Belarusbank could place its eurobonds with the return rate at least 13-14% per year. At the same time, amid decrease of the liquidity of the largest bank (due to reduced number of deposits and transfer of ruble deposits to dollar ones, which was still possible in March or early April), the aforementioned rate is not a too high price for the opportunity to receive $ 500 million in cash. Also it cannot be excluded that the failure of the Belarusbank to enter the Eurobond market is due not so much to the high cost of borrowing, as to the general lack of any interest of investors to this kind of bank securities, irrelevant of their cost.