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Parallel lines that merge

Issuer: Republic of Austria

Amount: Ffr5 billion

Launched: January 13

Lead managers: JP Morgan/CDC

Watch out for a lot of regular Euromarket borrowers issuing instruments called parallel Eurobonds. This January, the Republic of Austria unveiled an innovative attempt to position its borrowing programme for the pan-European government bond market that should quickly emerge following the introduction of the single currency from 1999. It sold Ffr5 billion ($902.5 million) of parallel Eurobonds to a range of French and other European investors in a well-supported seven-year issue led by JP Morgan and CDC Marchés.

The French franc Eurobonds carry coupons (5.5%) and maturity dates (January 18 2004) identical to an existing benchmark domestic Austrian Schilling Bund. The deal offers investors options eventually to merge the bonds into larger, euro-denominated issues.

Austria expects to be among the first states to participate in the European single currency from January 1 1999. It is likely to convert its domestic government bonds from Austrian Schillings into euros, although it has made no commitment to do so yet. Only France and Belgium have. Even Germany has made no explicit undertaking immediately to redenominate its entire domestic debt and Austria does not want to pre-empt it.

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