REUTERS
RABAT (Reuters) – Morocco plans to sell a sovereign bond worth $1
billion in October to help finance budgeted investment plans, its
budget minister said on Wednesday.
“We have decided to sell sovereign bonds worth 700 million euros or $1
billion in October,” Budget Minister Idriss Azami al-Idrissi told
Reuters by telephone, confirming what a senior government source said
on Sunday.
Idrissi noted that “our preference is for a dollar-denominated issue”
and that Rabat has already mandated financial advisors for the issue.
Rabat wants to use the proceeds of the bond sale to help finance “many
budgeted investment projects”, Idrissi said without being specific.
The announcement of the new bond issue followed the award last week to
Rabat of a $6.2 billion precautionary line of liquidity from the
International Monetary Fund (IMF). But Idrissi rejected any links
between the newfound flexibility offered by the IMF deal and the new
bond issue.
The finance ministry said the IMF deal should give comfort to foreign
lenders, investors and rating agencies, and allow it to tap
international capital markets at favorable terms.
“We decided to go with this sovereign bond issue because market
conditions have become favourable,” Idrissi said, noting that the cost
of insuring Moroccan debt is currently below its level at the start of
the year.
“Our CDS (Credit Default Swap) fell by 20 (basis percentage) points
between yesterday and today alone … It bodes very well for our
upcoming issue which we think will cost us less than the most recent
one,” he said.
It would be the first time that Morocco, a relative newcomer to the
international sovereign bond market, gives serious consideration to a
greenback-denominated issue.
While it is not convertible, Morocco’s dirham currency is pegged to a
basket of currencies in which the euro accounts for 80 percent of the
total weighting and the dollar for 20 percent. The breakdown reflects
Morocco’s trade exchanges.
In its most recent international bond sale, Rabat raised about 1
billion euros in 2010 after 500 million euros from a similar issue in
2007. Both issues had a ten-year maturity.
Idrissi stopped short of confirming what the source has said about
Rabat’s intention to allocate around half the upcoming issue to
institutional investors from Gulf Arab countries.
Last week, King Mohammed urged his government to tap financing from
Gulf Arab sovereign wealth funds to help with projects Morocco hopes
will help it meet pressing social needs.
Idrissi however said Rabat’s likely intention to have the issue
denominated in U.S. dollar does not aim to address exclusively
preferences of the Gulf Arab region.
“Anyone considering sovereign bonds knows the geography for a (U.S.)
dollar-denominated issue … Our previous bond issue had interested
investors from Asia and the United States,” Idrissi said.
The $90-billion economy is heavily anchored to the euro zone whose
troubles hit tourism revenues, migrant transfers and foreign
investment this year, raising concerns about the country’s current
account balance.
(Reporting By Souhail Karam; editing by Ron Askew)
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