16.09.2020

On Tuesday 15th September, the Republic of Bulgaria, rated Baa2/BBB/BBB (Moody’s/Standard & Poor’s/Fitch), has successfully issued a dual-tranche EUR 1.25bn 10 year and EUR 1.25bn 30 year Senior Unsecured transaction in Regulation S format. The 10 year tranche was priced at 99.863 with a 0.375% coupon at a spread of 60 basis points over mid-swaps (0.389% yield), while the 30 year tranche was priced at 97.566 with a 1.375% coupon at 145 basis points over mid-swaps (1.476% yield).

BNP Paribas, Citi, JP Morgan and UniCredit acted as Bookrunners for the transaction.

Capitalizing on the prevailing favourable market backdrop and scarcity value pertaining to Bulgarian risk, the Republic of Bulgaria returned to the international debt capital market after 4+ years of absence since its last dual-tranche issuance in March 2016.

The mandate was announced on Monday, 14th September, with Global Investor Call and 1x1 calls with select investor taking place the same day. Having obtained valuable investor feedback and supported by a positive momentum generated on the first day, the Ministry of Finance of Bulgaria decided to proceed with Initial Pricing Thoughts (IPTs) announcement on Tuesday, 15th September. IPTs stood at MS+95bps area for the 10yr note and MS+175-180bps for the 30yr one.

Bulgaria’s dual-tranche offering drew investor attention straightaway – the orderbook grew in size gradually, reaching EUR 7.2bn at the stage of the first guidance at 11:58 UKT / 13:58 EEST. High-quality orders allowed for a tightening of 20bps from the IPTs at this stage for the 10yr note and 15-20bps for the 30yr. Following a constructive price revision as well as observing solid demand for the offering, investors continued to pile up bids for both bonds at the US open. A subsequent bookbuild added circa 3bn worth of orders, propelling the Ministry to announce further tightening of 15bps to MS+60bps on the shorter tranche and MS+145bps on the longer one. Expected total size of EUR 2.0-2.5bn was indicated at this stage. The deal was launched at 15:15 UKT / 17:15 EEST with equal size split between the two tranches – each tranche capped at 1.25bn. It was priced afterwards at 19:25 UKT / 21:25 EEST. The observed revision of 30/35bps from the IPTs level demonstrates how strong the demand for Bulgaria’s sovereign credit was.

Final orderbook reached EUR 3.7bn from 254 accounts on the 10 year, and EUR 3.6bn from 236 investors on the 30 year tranche.  Demand came from across the entirety of Europe, with fund managers and banks dominating in both tranches.

The transaction marks several milestones as it is the second largest deal for the Government with the 10yr achieving the lowest ever coupon / yield / re-offer spread for Bulgaria. It is also worth mentioning that the 30yr tranche is the longest tenor Bulgaria issued in. This offering has further populated Bulgaria’s curve and increased its overall liquidity.