Belarus plans maiden eurobond in 2010-finmin

By Andrei Makhovsky and Lidia Kelly

MINSK, Nov 12 (Reuters) - Belarus may issue a maiden eurobond in 2010, following in the footsteps of Russia, Kazakhstan and many other economies also eyeing sales next year, Finance Minister Andrei Kharkovets said on Thursday. The former Soviet republic has seen its economy dented badly by deteriorating demand from the recession-routed Russia and Europe, its chief exports markets, forcing it to look for sources of external funding.

Kharkovets said Belarus has been offered "significant" loans by Russia's largest bank Sberbank, which will cover a large part of Belarus' external financing needs this year.

"The size of financing is yet to be determined, it will likely be a mid-term facility and the deal is expected to be closed by the end of this year," a source familiar with the talks told Reuters.

Sberbank was not immediately available for comment and Kharkovets did not specify the amounts either of the loans or the eurobond. He did not say which currency it would be issued in -- a eurobond is a bond issued externally by a country in a foreign currency.

Belarus is one of the least reformed of the pre-1990 eastern bloc and, beyond exports, has been largely reliant on cheap gas and other resources from its bigger neighbours to get by.

In September, the government sharply lowered its 2009 gross domestic product (GDP) forecast to growth of 1-2 percent, against earlier estimates of a 2-5 percent expansion.

The country has already secured a $3.63 billion stabilisation loan from the International Monetary Fund, and a $1.5 billion from the Russian government. But in May, Russia delayed disbursing a further $500 million, saying it was worried about the creditworthiness of Belarus.

"If Russia's not extending them financing, then they're going to be more dependent on capital markets," said Yaroslav Lissovolik, chief strategist with Deutsche Bank in Moscow.

Belarus' external debt stands at $17 billion as of July, according to central bank data.


The cash-strapped country will be joining a litany of other economies planning sovereign debt issuance to find financing for the surge in fiscal deficits, run up by efforts to fend off recession after last year's financial turmoil.

Russia is set to issue up to $18 billion of eurobonds next year, returning to the market after a decade, while Kazakhstan is eyeing a $500 million placement .

Developing countries will be most likely be dealt higher spreads on their bonds, the World Bank said in a recent report.

"Many institutions that have provided financial intermediation for developing country clients have virtually disappeared," the Bank said.

Belarus has discussed plans for raising a eurobond since 2007 as part of plans to raise capital on international markets. But the issue has repeatedly been postponed in connection with unfavourable conditions on world markets.

In July, Nadezhda Yermakova, head of major state-controlled bank Belarusbank, said that Belarus may issue its delayed maiden eurobond this year, worth $500 million..

Deutsche Bank's Lissovolik said the rather small size of the Eurobond might work to the country's advantage.

"If they offer good term to investors, then yes, they can be successful in neutralising the adverse conditions (crowded competition)," Lissovolik said.

(Writing by Toni Vorobyova and Lidia Kelly; editing by Patrick Graham)


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