Банкеръ Weekly

Briefs

BULGARIAN BRADY BONDS GO ON PENSION

Back in June 1994, when the agreement was signed with Bulgaria's London Club private creditors for reducing and rescheduling the country's debt and for transforming it into three types of Brady bonds, nobody suspected that 11 years later these bonds would have gone down in history. As a result of the agreement signed in the Boyana residence, collateralised discount bonds (DISCs), front loaded interest reduction bonds (FLIRBs), and interest arrears bonds (IABs) of USD5.7BN total par value were issued. The DISCs were payable in a 25-year period, the FLIRBs - in 18 years, and the IABs - in 17 years. However, none of the three types of bonds will live as long as planned.On June 27, 2005, the Government of PM Simeon Saxe-Coburg-Gotha announced that on the following day it would use its right to redeem before maturity FLIRBs of a USD607.64MN face value. In fact, this is the last package of Bulgarian Brady bonds that remained after a series of swaps and acquisitions. Thanks to these operations, in a three-year period the same Government cancelled the bonds of the restructured debt to the London Club creditors. That was carried out in five stages. In March 2002, the Government exchanged USD1.33BN worth bonds with global securities. The operation was repeated in the summer of the same year, when Brady bonds worth USD866MN were also thrown in the dustbin. In July 2004, the Government bought up all remaining DISCs which had a USD774MN par value. Half a year later - on December 21, the cabinet declared that on February 28, 2005 it would buy up all remaining IABs at face value, too. Their par value amounted to USD937.5MN. Now it's turn of the last package of FLIRBs worth USD607.64MN.The Ministry of Finance announced in its official release that the repurchase was carried out on the basis of a resolution of the Council of Ministers dated November 25, 2004 and was coordinated with the 2003 Strategy for National Debt Management. The Government forecasts that the redemption before the set term will help for reducing the nominal value of the national foreign debt by USD607.64MN (BGN983.65MN), while costs for serving the debt in the next seven years will fall by some USD120MN (BGN194MN).

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