* Cyprus eyes post-bailout bond debut for 500 mln -finmin source
* EU island state teetered on verge of bankruptcy a year ago
* Bond issue could be swiftest for post-bailout nation (Updates throughout)
By Michele Kambas
NICOSIA, June 10 (Reuters) - Cyprus appointed lead managers on Tuesday to arrange its first post-bailout bond, underpinning its ambitions for a swift comeback to international markets just a year after teetering on the verge of bankruptcy.
The Cypriot finance ministry said it had mandated Deutsche Bank, Goldman Sachs International, HSBC, UBS Investment Bank and VTB Capital to handle briefings for investors. A euro-denominated transaction may follow, subject to market conditions, the finance ministry said.
Last week’s easing measures by the European Central Bank have given fresh impetus to a two-year euro zone debt rally that has driven borrowing costs in countries that were engulfed in the sovereign debt crisis to record lows.
A senior finance ministry source told Reuters that authorities were contemplating raising up to 500 million euros ($680.75 million) but that the final figure, timing and maturity of the issue would be made after consulting lead managers.
The source could not rule out an issue as early as this month.
“This should not in any way be interpreted as a premature termination of the (economic) adjustment programme. We intend to continue that with the same determination,” the source said, referring to a fiscal consolidation programme being monitored by the International Monetary Fund and European Union.
Lenders extended a 10 billion euro financial lifeline to Cyprus in March 2013, when its banking system imploded from excessive exposure to Greece, and its fiscal system was crippled by non-access to international markets.
If Cyprus makes a successful return to markets, it would be the swiftest turnaround of a distressed nation after a bailout.
Cyprus raised 100 million euros ($136.15 million) in a 6-year, privately-placed bond issued on April 30, bearing a coupon of 6.5 percent. It was issued under its European Medium Term Note (EMTN) programme, which has a 9 billion euro ceiling.
The source said any funds raised from the market would not substitute for bailout funds. “Any funds would be used as part of the management of existing public debt, not covered by the financial envelope of the troika.”
Cyprus has not appeared on international markets since at least May 2011, when high yields on its existing benchmark bonds made external borrowing impossible.
Under an economic adjustment plan, Cyprus was not seen returning to financial markets until the end of 2015 at the earliest.
But the island republic has constantly outperformed expectations since the bailout, thanks to robust consumer spending and tourism. As a result, lenders have frequently adjusted their economic outlook to reflect a shallower recession than initially anticipated.
Cypriot economic output is now expected to contract by 4.2 percent in 2014, less than initial expectations of 4.8 percent. On Tuesday, Sapienta, an economic consultancy, said it expected the final decline in output to be 3.1 percent.
“The decline has really bottomed out,” said Sapienta director Fiona Mullen.
$1 = 0.7345 Euros Editing by Mark Heinrich