Georgia: Sovereign makes impressive Eurobond debut


Guy Norton
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Thanks to its growing reputation as one of the most business-friendly countries in the former USSR, the Republic of Georgia has established a strong investor following with its first ever Eurobond. Lead managers JPMorgan and UBS reported that the $500 million five-year maiden issue in April was more than three times oversubscribed, enabling them to price it at the tight end of the 7.5% to 7.75% range.

"The deal had real scarcity value and a benchmark status debut which provided a strong incentive for investors to participate," says Stefan Weiler, executive director at JPMorgan in London. He adds that as the first sovereign bond from the Caucasus region the issue was a welcome diversification play and at $500 million it is also eligible for inclusion in the widely followed JPMorgan EMBI emerging market bond indices.

A real hit

Igor Hordiyevych, managing director at UBS in London, says that the Georgian delegation headed by prime minister Lado Gurgenidze proved a real hit with investors, achieving a near 100% order conversion rate from their one-on-one meetings with potential buyers in Europe. Weiler says that the Georgian government used the roadshow as an opportunity to highlight the successful economic reforms of the past four years and also to allay investor concerns about the country’s relations with Russia and the two separatist regions of South Ossetia and Abkhazia.

There have also been positive developments on the domestic fixed-income front, with Bank of Georgia launching a pioneering promissory note programme, which enables international institutional investors to gain exposure to the Georgian lari and other regional currencies. The first issue off the programme was a GeL30 million ($21 million) three-month deal paying 7.5% which was sold to a US fund manager.

Thea Jokhadze, head of debt capital markets at Bank of Georgia in Tbilisi, says that as well as Georgian lari issuance the debt facility can also cater for deals in Ukrainian hryvnia and Azeri manat alongside a number of hard currencies. Maturities can range from one month up to a year. "With this new programme we can tailor the issuance to suit the needs of individual investors in terms of both tenor and currency profile," she says.


Given that the Georgian government stopped issuing lari-denominated bonds in June 2007, Jokhadze says that Bank of Georgia’s note programme is effectively the only way to gain direct exposure to the appreciating Georgian currency. "Over the past four years the lari has gone from GeL2.2 to the dollar to GeL1.45. At the beginning of the year it was at GeL1.59, so the rate of appreciation is increasing, driven by growing levels of foreign direct investment."