Jordan issues $1.75bn double tranche eurobond to boost finances amid Covid-19 pandemic

The issue was oversubscribed more than 6.25 times after attracting bids worth over $6.25bn, Jordan’s ministry of finance says

People sit at an Amman restaurant that reopened to the public on June 6 as Jordan lifted strict coronavirus restrictions after more than two months. Jordan raised $1.75 billion through a double tranchShow more

Jordan raised $1.75 billion (Dh6.42bn) from a double tranche eurobond at competitive rates to help the country cope with the economic fallout of the coronavirus pandemic.

A tranche of $500 million at 4.95 per cent over a 5-year maturity and another of $1.25bn at 5.85 per cent over a 10-year maturity, were oversubscribed more than 6.25 times after attracting bids worth over $6.25bn, the kingdom's ministry of finance said in a statement.

“The oversubscription and relatively low interest rate of Jordan’s eurobonds is a testament to its fiscal stability, as well as high confidence amongst the international community on Jordan’s positive economic trajectory particularly in light of its swift and decisive Covid response,” Jordan’s finance minister Mohammad Al Ississ said.

The government will use funds from the issuance to cover a $1.25bn eurobond maturing in October. It will also use some of the money raised to inject liquidity for the private sector by paying arrears accumulated by present and previous governments, Mr Al Ississ added. The arrears relate to money owed to hospitals, pharmaceuticals, energy, and contractors.

Jordan, whose economy relies heavily on foreign aid and grants, is projected to contract 3.7 per cent due to the impact of the pandemic, according to the International Monetary Fund. The government estimates the economy will shrink 3 per cent.

The kingdom was one of the first countries to close its airport in the Middle East and implemented a strict lockdown to prevent the spread of Covid-19. Jordan registered 1,132 Covid-19 infections to date and 9 deaths, according to the Johns Hopkins University, which is tracking the pandemic.

"Our decision to go to foreign markets was based on ensuring that we keep local financing within banks and other facilities available for the private sector at affordable rates, particularly in light of the liquidity crunch created by the coronavirus,” Mr Al Ississ said.

The finance ministry also said the rates were significantly lower than Jordan’s last eurobond issuance of 2017 and recent issuances by regional countries of similar ratings.

In May, Egypt issued a $2bn eurobond due 2050 at a yield of 8.875 per cent, $1.25bn in four-year notes at a yield of 5.75 per cent and $1.75bn in bonds due 2032 at 7.625 per cent. Bahrain also issued a 5-year and 10-year eurobond at 6.250 per cent and 7.375 per cent respectively.

In March, the IMF approved a $1.3bn four-year loan to the kingdom, which hosts more than a million refugees from Syria and other countries. The facility aims to help the country secure lower servicing costs for the $42bn in public debt that the country holds, which has spiralled in the last decade as a result of the spillover of regional conflicts on its economy.

In May, the IMF approved an additional $396m as part of a request for emergency financial assistance under the Rapid Financing Instrument to help cushion the impact of Covid-19 on the kingdom.