07.11.2013

The Ministry of Finance has finalised its preparatory actions for the assumption of new external government debt of up to EUR 360 million under the legislation of the Federal Republic of Germany.

The preparation of the required documentation was approved by the Government and on 4 November 2013 Minister Chobanov signed the Agreements for transferable fixed-interest loans maturing in 2020, 2023 and 2028 between the Republic of Bulgaria as Borrower and DEUTSCHE BANK AKTIENGESELSCHAFT as Creditor and Paying Agent. These agreements are to be ratified by the National Assembly on the grounds of Article 85, paragraph 1, sub-paragraphs 4 and 8 of the Constitution of the Republic of Bulgaria as they contain financial liability for the state and are expressly subject to ratification. Transaction intermediaries are DEUTSCHE BANK AKTIENGESELSCHAFT and RAIFFEISEN BANK INTERNATIONAL AG.

The procedure for assumption of new debt was launched on 2 October 2013 when the Government authorised the Minister of Finance to take the preparatory actions required as per §14а of the Transitional and Final Provisions of the 2013 State Budget of the Republic of Bulgaria Law. The budget revision increased the maximum amount of new debt that the Republic of Bulgaria may assume from BGN 2 up to BGN 3 billion without changing the government debt ceiling of BGN 14.6 billion. This became necessary as a result of the extraordinary issue of government securities to the amount of BGN 800 million in February 2013 which expended 40% of the limit of newly assumed debt laid down in the 2013 State Budget of the Republic of Bulgaria Law before the revision.

The agreements provide for the placing of three tranches of loans with 7, 10 and 15-year maturity respectively and the specific parameters will be determined after a marketing survey among the investors and a process of preliminary receipt of offers. The offering of transferable loans under the law of the Federal Republic of Germany will optimise the maturity structure of government debt and will diversify the investor base in Bulgarian sovereign debt.

Loan funds will allow to recover the budget buffers depleted as early as the start of the year and will be used to increase the fiscal reserve and minimise the possible liquidity risks at the beginning of next year.

The assumption of new debt of up to EUR 360 million will not affect the maximum year-end level of government debt of BGN 14.6 billion in accordance with the requirements of the 2013 State Budget of the Republic of Bulgaria Law.