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Inventiveness keeps deals flowing

CEE issues have innovated on several fronts this year. Bulgaria made Europe’s first Brady exchange, Poland revived sterling sovereign issues and Gazprom launched Russia’s biggest ever domestic corporate bond.

Bulgaria braves new ground
Borrower: Bulgaria
Deal type: Brady exchange
Deal amount: $2.2 billion
Advisers: JPMorgan, Citigroup

Sovereign debt exchanges can be politically controversial. So they are often only considered by a government that is either fairly secure in its power, or - like Argentina - is desperate. So some were surprised that Bulgaria's government, after only a year in power, would want to take the risk of undertaking Europe's first Brady exchange, particularly when both the finance minister and his deputy are former investment bankers and so perhaps easy targets for populist accusations of access capitalism.

Krassimer Katev, Bulgaria's deputy finance minister and a former emerging-market trader at Paribas, Daiwa Europe and AIG Asset Management, says: "Obviously we took some calculated risks. It's quite difficult politically to perform flexible debt restructuring, because all transactions related to the public debt have to be passed through government. So the opposition obviously attacked the measure, and tried to make short-term political gains out of it. They actually challenged the transaction in the constitutional court. The president got involved. It was high political drama."

But ultimately finance minister Milen Velchev and Katev managed to bring Bulgarians round to the benefits of doing a swap.

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