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Hungary issues mandate for euro bond, guidance reported at about 280bp over swaps

Hungarian state debt management agency AKK said Wednesday it issued a mandate to Deutsche Bank, ING and UniCredit to organize a euro denominated bond issue for Hungary.

The AKK statement came shortly after a report by Dow Jones that a euro-denominated bond expiring in 2019 Bond, to be launched by the State of Hungary, is to be priced at about a 280 basis points spread over midmarket swaps, s reported on Wednesday.

AKK did not specify the term or the size of the issue, only said it was for general financing purposes.

News about the preparations of a bond issue, including a roadshow, has been circulating since early April. Gyula Pleschinger, head of AKK, told Reuters at the time that they will do a no-deal road show in Europe to present the government's economic reform plan, and "If conditions are suitable, a (euro-denominated) bond issue may follow."

Prime Minister Viktor Orbán, National Economy Minister György Matolcsy, National Development Minister Tamás Fellegi and State Secretary Mihály Varga will visit Frankfurt this week, the prime minister's press office said on April 28 although it did not confirm the information of business news portal that the visit, due on May 6, is part of a road show probably to drum up interest in a €500 million - 1 billion bond issue.

Hungary issued a combined $4.25 billion of a ten- and 30-year dollar bonds in March and April. The dollar issues, worth about €3 billion, left about €1 billion to meet the annual foreign bond issue plan.

AKK said earlier it planned to issue €4 billion of foreign currency bonds in 2011, enough to cover €2 billion of bonds maturing in June and October and a €2 billion repayment due the European Commission in November. The repayment is the first on principal of a IMF-led standby loan Hungary signed for in November 2008, at the height of the global financial crisis.

Hungary's last issued a eurobond in July 2009. It sold €1 billion of five-year bonds in the offer, its first foreign issue after the crisis. The bond had a 6.75% coupon and was priced to yield 432bp over the comparable German bund.

Hungary is rated Baa3 by Moody's Investors Service, and BBB- by both Standard & Poor's and Fitch Ratings.