Jordan's billion-dollar Eurobond issue garners mixed reactions

Published October 26th, 2016 - 08:00 GMT
The underwriting applications for the bonds reached around $4 billion, or 400 per cent of the issuance value.(Shutterstock)
The underwriting applications for the bonds reached around $4 billion, or 400 per cent of the issuance value.(Shutterstock)

Jordan has issued $1 billion worth of Eurobonds on international markets, according to Minister of Finance Omar Malhas.

The coupon rate on the 10-year issue was 5.75 per cent with a 5.8 per cent yield, according to Malhas, who added that the underwriting applications for these bonds reached around $4 billion, or 400 per cent of the issuance value.

Economists voiced mixed reactions on the bond issuance.

"This is another debt that is added to Jordan's rising public [debt]… The coupon rate is very high and the fact that the rate was covered by fourfolds is not due to the attractiveness and strength of the Jordanian economy, but rather due to the surplus of cash on international markets," economist Zayyan Zawaneh told The Jordan Times on Tuesday.

Economist Yusef Damra differed, saying the coupon rate and the fact that the bonds being covered by 400 per cent is an indication of Jordan's resilience in a troubled region.

Jordan's success in issuing the Eurobonds in one day with a coupon rate that is less than that of last year — when it reached 6.375 per cent — reflects international investors' confidence in Jordan, its leadership, its economy and the financial reform programmes, Malhas said in a statement to The Jordan Times.

Citigroup and J.P. Morgan managed the issuance, according to the minister.

Zawaneh said Jordan's economy which is growing annually between 2.5 per cent and 2.7 per cent, cannot absorb more debts.

“This rate of economic growth, albeit weak, is not reflecting positively on the lives of citizens and is not even sufficient to cover the debt service,” said Zawaneh.

Jordan’s overall public debt reached JD27.6 billion at the end of June, according to Finance Ministry figures.

Damra saw the situation in a different light.

“These rates are very positive in light of Jordan’s situation vis-à-vis regional turmoil. Last year, Iraq issued a bond and the coupon rate it could secure was around 11 per cent, which prompted the Iraqi authorities to cancel the bonds eventually,” said Damra, adding that it was not fair to compare Jordan with Saudi Arabia or Oman, which have issued bonds at a coupon rate of around 3.5 per cent.

“Compared to previous bonds Jordan issued, the new issue looks good in many aspects, especially since they succeeded in attracting a diversity of investors,” he added. 

By Mohammad Ghazal

 


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