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The Ministry of Finance reduced Bulgaria's external debt by buying back the country's Euro and US Dollar denominated Global Bonds and writing them off the international registers. The bonds are from issues ISIN XS 0145624432 7.5 % EUR 2013 and ISIN XS 0145623624 8.25% USD 2015 and amount to BGN 293.3 million. The nominal value of the cancelled bonds denominated in US Dollars and maturity 2015 is US$ 184.2 million, and those denominated in Euro with maturity 2013 - EUR 17 million.

Pursuant to the 2008 State Budget of the Republic of Bulgaria Law the Minister of Finance may decide to repay obligations under the government debt in advance in order to achieve optimisation of its servicing. The buy-back of part of the debt is a measure to mitigate the effects of the global financial crisis on the state budget. It saves interest costs until the bonds maturity to the amount of EUR 5.3 million in total for the Euro denominated bonds and US$ 93.2 million in total for the US Dollar denominated ones.

The debt securities were bought on the secondary market in the period November - December 2008. The buy-back operations have been effected in a period when shrunk liquidity globalwise has led to higher yield of the securities of emerging markets to which Bulgaria belongs. The higher yield and the lower market quotes of Bulgaria's global bonds provided an opportunity for the Ministry of Finance to buy back part of the global bonds at a price lower than their nominal value.

The average net price (net price is the price that does not include the accrued but unpaid interest) at which the US Dollar denominated bonds have been bought back is US$ 95.09 for US$ 100 face value, and the euro denominated ones - EUR 98.02 for EUR 100 face value. For the sake of comparison the average offer price for the US Dollar denominated bonds was US$ 111.82 in 2008, US$ 117.64 in 2007 and US$ 117.52 in 2006. For the euro denominated bonds the average offer price in 2008 was EUR 107.42, in 2007 - EUR 114.16, and in 2006 - EUR 119.29.

The decision for the buy-back has also been dictated by the absolute and relative value of global bonds in the government debt structure - as of 30.10.2008 these securities constituted 36.9% of the government debt and amounted to EUR 1,831.4 million. The reduction of the global bond issues' volume will reduce payments in the peak 2013 and 2015 when they mature and contribute to a more even government debt repayment profile.

After the operation, bonds to the amount of US$ 1,086 million and EUR 818 million remain in circulation*.

* The nominal volume also includes bonds with ISIN US12015KCP66 registered under Rule 144A of the US 1933 Securities Law as amended, as well as bonds with ISIN US12015KCN19 registered under Rule 144A of the US 1933 Securities Law as amended.

Price Charts of Global Bonds - USD, Euro


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