Page 27 - BELRptNov18

due to an increase in international reserves.
FX debt service is $2.6bn (not including Eurobond payment) in 2018,
which will be covered by a mix of multilateral financing, local market issuance, use of FX cash buffers and potentially a new international bond issuance. FX liquidity in the local market and FX government revenues derived from custom duties and trade of oil products further mitigate near-term financing risks.
Belarus's gross external financing requirement (current account deficit plus medium- and long-term amortisations) has declined to 101% of international reserves, from a previous peak of 223% in 2014.
Sustained reduction in refinancing risks will depend on continued progress on diversifying external financing sources , refinancing opportunities of Russian bilateral debt and development of the local market. The next Eurobond amortisation is not until 2023.
Who is buying Belarusian eurobonds?
Belarus tapped the international debt market on February 21 for the first time this year with a new $600mn issue of 12-year Eurobond with 6.2% coupon following January's drop in the nation's foreign exchange reserves by $838mn, or 11.5% month-on-month, to $6.477bn.
The bond follows on from last year’s highly successful bond placement. In June 2017, Belarus placed $1.4bn worth of dual-tranche US dollar-denominated Eurobonds with five-year and ten-year maturities. The yield of the five-year tranche raising $800mn was 7.125%, with the ten-year tranche raising $600mn at 7.625%.
Earlier in January this year the government said that it intends to issue approximately $1bn of debt a year. But who is buying the paper, Sberbank CIB asked in a note.
“Data on Belarus's most recent Eurobond placement confirmed that US accounts were the main investors, acquiring 52% of the issue, while investors from the UK and continental Europe received 30% and 17%, respectively,” Alexander Golinsky a fixed income analyst with Sberbank CIB said in a note. “For Belarus, the predominance of US investors in its primary issuance is relatively novel.”
Belarus remains an exotic market and most of the specialists covering these frontier issuers in Emerging Europe are based in London. The rise of the US investor in Belarus’ bonds suggests that these investors remain very interested in high yields but also confirm the rising interest in frontier markets.
“In 2011, when Minsk made its debut on the international capital markets with a $0.8bn, 7y Eurobond issue, 33% of the paper went to UK accounts, 19% to German, Austrian and Swiss investors, 13% to Russian investors, and only 22% to US accounts. This distribution also reflected the fact that until 2017 Belarus issued paper only in Reg S format,” says Golinsky.
“The situation changed in June last year, when the Finance Ministry placed a total of $1.4bn in two Eurobond issues. The favourable global liquidity situation and the significant size of the placements, a record for Belarus, attracted the
27 BELARUS Country Report November 2018 www.intellinews.com