EBRD backs Romania’s first covered bond

By Olga Rosca
@olgarosca

Alpha Bank’s issuance seen as a boost to country’s capital markets

  • Alpha Bank Romania issues country’s first covered bond
  • Issuance to be listed on Luxembourg and Bucharest stock exchanges
  • Innovative financing tool is a new boost for Romania’s capital markets.

Romanian capital markets are getting another boost as Alpha Bank, a local lender, is issuing the country’s first covered bonds. The EBRD has invested €40 million in the €200 million offering. 

The investment builds on the Bank’s extensive policy work in Romania to help revise the legal framework for covered bonds and align it with the EU best practices. The new legislative environment will enable more lenders to issue covered bonds as they seek more diverse, longer-term sources of funding.

Covered bonds are a popular funding tool in Europe, secured by assets of the issuing bank’s balance sheet and viewed as low-risk investments.

They help diversify lenders’ funding structures and secure long-term sources to support lending growth.

With over €2,500 billion in outstanding amounts, they currently represent one of the largest debt markets in the EU.

Alpha Bank’s bonds, which have a five year maturity and pay a floating rate coupon, are backed by prime Romanian residential mortgages and are expected to be rated Baa2 by Moody’s.

Sergiu Oprescu, Executive President of Alpha Bank Romania said:  “Almost 18 years after the launch of the first ever mortgage loan in 2001, Alpha Bank Romania is opening a new chapter in the Romanian banking market with this new funding tool, demonstrating once again its pioneering capabilities”.

Lucyna Stanczak-Wuczynska, EBRD Director for EU Banks, said: “We hope that with an enabling legislative framework, and following Alpha Bank’s success, other Romanian lenders will follow suit. More of such issuances will further strengthen Romania’s banking system, support lending growth and strengthen financial intermediation.”

Backing such issuances by local lenders is one of the ways that the EBRD is helping develop Romania’s capital markets and banking system.

Earlier this year, the Bank approved a framework to invest in senior unsecured and secured bonds, including covered bonds, issued by Romanian lenders, making €350 million available for such transactions.

Previously, the EBRD has invested €200 million in six bonds issued by Romanian banks.

The EBRD is a leading institutional investor in Romania and to date has invested over €8.3 billion in the country, primarily in the private sector.

In 2018 alone, it committed over €400 million across various sectors of the Romanian economy.