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Georgia’s Successful Eurobond Transaction

Published: April 9, 2011 | 3:57 pm
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On April 7, 2011, Georgia successfully priced a new 10-year $500 million Reg S / 144A benchmark transaction and in parallel redeemed $417 million of its existing $500 million 7.50% bond due 2013 through an “any and all” cash tender:

The tender participation ratio of 83% was very high and the majority of existing investors took advantage of the opportunity to swap their exposures into the new 10-year benchmark offering. A carefully implemented 3-days multi-team roadshow strategy, covering San Francisco, Los Angeles, Boston, New York, London, Frankfurt, Munich, Geneva, and Zurich, highlighted Georgia’s strong credit momentum and attracted numerous new institutional investors.

As this was the government’s first 144A transaction, Georgia was able to successfully broaden its investor base particularly amongst new investors in the U.S.

In conjunction with the tender expiring on April 6 and on the eve of Portugal’s bail-out request, Georgia announced a 10-year EMBI-eligible benchmark bond along with a ‘mid-7%’ price whisper. On the back of a rapidly building order book, which garnered over $2.66 billion of total interest from 149 accounts, Georgia announced initial price guidance of ‘7.25 – 7.50%’ at the opening in London on April 7 and later priced the transaction with a yield of 7.125%, or a spread over mid-swaps of 346bps. While all other recent sovereign transactions required healthy new issue premiums over their existing curves, Georgia’s new 10-year offering priced 148bps inside of its existing bond due 2013, which traded at 494bps over swaps prior to the announcement of the tender.

The transaction’s 357bps spread over the 10-year UST provides a 117bps improvement over Georgia’s shorterdated $500 million 5-year offering issued in 2008, or a 37.5bps decrease in yield terms. The achieved pricing level is also materially inside of other similarly rated sovereign issuance from the region.

S&P’s and Fitch’s decisions to upgrade Georgia’s credit rating outlooks to ‘positive’ from ‘negative’ in March helped highlight the country’s positive credit momentum ahead of the deal announcement. Driven by the significant 5.3x oversubscription and transaction’s high scarcity value, the bond performed well in the secondary market, trading up to par on the day after pricing.



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