UPDATE 1-Cyprus eyes post-bailout public market return

Tue Jun 10, 2014 7:55am EDT

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By Sarka Halas

LONDON, June 10 (IFR) - The Republic of Cyprus is preparing a benchmark public debt sale just a year after it was bailed out, which if successful would make it the quickest return to the bond market by a sovereign after a rescue.

The issuer has mandated Deutsche Bank, Goldman Sachs, HSBC, UBS and VTB Capital to arrange a series of fixed income investor meetings in Europe ahead of the deal.

The announcement comes on the back of a peripheral rally that has been gaining momentum following last week's European Central Bank announcement that it is seeking to boost Europe's growth.

Greece's 10-year bond, which peaked at 6.3% earlier in June, was quoted at 5.4% today, according to Tradeweb.

The sovereign will be meeting with investors in London and Germany over two days starting on June 16.

Cyprus sold a 100m private placement back in April. The bond was sold to an overseas investor and was seen as an initial test for a potential public bond market return.

The issue carried a 6.5% coupon, but with peripheral spreads tightening to record lows, a syndicate banker working on the new potential Cyprus bond spotted it recently at 5%.

Cyprus has shown stronger than expected economic performance and full compliance with the European Stability Mechanism and International Monetary Fund adjustment programme.

The sovereign was effectively shut out of international financing markets in May 2011 as concerns around the health of eurozone peripheral countries escalated. This caused its benchmark bonds to spike in yield to above 14%.

Cyprus is rated Caa3/B/B- by Moody's/S&P/Fitch (positive/positive/stable).

Back in April, the sovereign was raised one notch by Standard and Poor's amid a diminishing threat of the country not being able to meet loan repayments. Moody's will be next to review the country's rating on July 18. (Reporting by Sarka Halas, Editing by Helene Durand, Alex Chambers)

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