Economy

Iceland bond highlights ‘exceptional’ post-crisis rebound

Iceland is returning to international bond markets for the primary time in additional than 18 months, marking one other step in its restoration after the 2008 disaster that bankrupted its greatest banks and depressed the economic system.

The Nordic island is aiming to boost €500m in a five-year euro-denominated bond, based on folks acquainted with its plans, just like a bond sale of December 2017. Proceeds can be used to purchase again €352m of excellent bonds.

Working a funds surplus, Iceland has no fast want for the remaining cash raised. As a substitute, the federal government’s goal is to rebuild the nation’s profile with debt traders, stated Bjarni Benediktsson, finance minister.

“A part of our coverage is to check the markets at any time when we really feel that the situations are there,” he informed the Monetary Instances, including: “We wish to view it as an insurance coverage coverage; we have to preserve our presence available in the market. We’re testing . . . entry, testing phrases . . . in order that we are able to keep our well-funded reserves again dwelling.”

He described as “exceptional” the nation’s restoration from the disaster that noticed the collapse of its three largest banks, the convictions of greater than two dozen bankers and the introduction of capital controls.

Iceland’s foreign-currency debt has a single-A credit standing from Commonplace & Poor’s and Fitch, recovering from troughs of triple-B minus within the years after the banking bust. Harry Koppel, managing director of sovereign debt capital markets at Barclays, famous that from October 2002 to March 2008, Moody’s had gone as far as to charge Iceland’s foreign-currency debt as triple-A. The company now charges it A3, denoting a “low” credit score danger.

“The suggestions from the market is that if a decade in the past the . . . score was beneficiant and overshot, the present . . . score appears to be like too low given [Iceland’s] beneficial authorities debt dynamics and powerful credit score profile,” he stated.

The federal government’s tapping of bond markets follows robust demand for Iceland’s Arion Financial institution — previously often called Kaupthing — that in 2015 issued the primary bond by an Icelandic financial institution for the reason that disaster. Arion Financial institution’s debut €300m three-year difficulty was met with extra demand, highlighting each traders’ thirst for prime yields and new ranges of confidence within the restructured banking sector.

Iceland’s booming tourism sector has helped the nation’s financial rebound because the northern lights, sizzling springs and mountainous surroundings have attracted rising numbers of holiday makers. Tourism contributed eight.6 per cent to Iceland’s gross home product in 2017, with arrivals growing by 1 / 4 on the earlier yr.

Mr Benediktsson added that the inflow of vacationers had uncovered limitations of the island’s infrastructure. “Residing with this new pillar of the economic system, the tourism sector, is one thing that we’re studying as we’re going,” he stated. “It’s a new actuality for us.”

The tender deadline for Iceland’s bond is Wednesday. Barclays, JPMorgan, Morgan Stanley and Nomura are bookrunners.

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