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Jordan’s Eurobond issuance oversubscribed six times at competitive rates, high demand — Finance Ministry

By JT - Jul 01,2020 - Last updated at Jul 01,2020

Mohamad Al-Ississ

AMMAN — Jordan, on behalf of the Ministry of Finance and in cooperation with the Central Bank of Jordan, on Tuesday issued a double-tranche Eurobond at $500 million at 4.95 per cent over five-year maturity and $1.25 billion at 5.85 per cent over 10-year maturity.

 

The double-tranche bond issue has been oversubscribed by more than 6.25 times after attracting bids worth over $6.25 billion, according to the Ministry of Finance.

The high demand led to lowering the yield on the recently offered Eurobonds, lessening the interest burden on the country going forward. The rates were significantly lower than Jordan’s last Eurobond issuance of 2017 and the recent issuances by peer countries of similar ratings, the Finance Ministry said in a statement.

In May, Egypt issued a Eurobond at $2 billion of notes due 2050 at a yield of 8.875 per cent as well as $1.25 billion in four-year notes at a yield of 5.75 per cent, and $1.75 billion in bonds due 2032 at 7.625 per cent. Bahrain also issued a five-year and 10-year Eurobond at 6.250 per cent and 7.375 per cent respectively, the ministry said.

In a statement in response to the issuance, Finance Minister Mohamad Al-Ississ commented: “The oversubscription and relatively low interest rate of Jordan’s Eurobonds is a testament to its fiscal stability, as well as high confidence amongst the international community on Jordan’s positive economic trajectory particularly in light of its swift and decisive COVID response.”

 

“We effectively and ethically prioritised safety and flattened the coronavirus curve, allowing us to incur minimal human and economic losses and reopen our economy in record time,” the minister was quoted in the statement as saying.

In a statement following the approval of the Fund's Rapid Financing Instrument, Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair of the IMF, said: "The Jordanian authorities have responded with decisive containment and health measures that effectively limited the spread of the virus with minimal fatalities. They also implemented a timely package of policies to mitigate the economic fallout of the pandemic."

The Kingdom also has been able to maintain its favourable sovereign credit ratings to encourage investor appetite in light of its steadfast response to COVID-19. Its Moody’s rating is B1 (Stable); S&P is B+ (Stable); and Fitch is B- (Negative).

On the decision to go to the Eurobond, Al-Ississ stated: “Jordan is fortunate to have available domestic financing, but our decision to go to foreign markets was based on ensuring that we keep local financing within banks and other facilities available for the private sector at affordable rates, particularly in light of the liquidity crunch created by the coronavirus.”

Al-Ississ specified that the funds garnered by the issuance will go towards covering the Eurobond maturing in October, worth $1.25 billion, in addition to injecting liquidity for the private sector by paying arrears accumulated by both present and previous governments. These arrears include those owed to hospitals, pharmaceuticals, energy and contractors.

He noted: “Not only are we allowing for liquidity to be maintained domestically, but we are using foreign financing to pump further liquidity to the domestic market.”

Jordan has recently signed onto an International Monetary Fund Extended Fund Facility Programme based on growth-enhancing measures, boosting investor confidence in the economy. It has also been chosen as one of the top three reformers in the Ease of Doing Business Index by the World Bank.

 

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