UPDATE 3-Lithuania issues $2 bln 10-year bond-finmin

* Lithuania issues $2 bln bond, biggest ever

* Debt to finance budget deficit

* Ratings agencies point to economic stabilisation, but

continued high deficit, fiscal strains
(Adds finance minister, coupon)

LONDON/VILNIUS, Feb 4 (BestGrowthStock) – Lithuania issued its
biggest sovereign bond on Thursday, raising $2 billion that
will help it finance its public sector deficit, which has risen
during its deep recession.

Unlike Latvia, which at the end of 2008 took a 7.5 billion
euro bailout, Lithuania has been able to continue to tap
financial markets for its funding. Its previous eurobond was in
October last year when it raised $1.5 billion.

Finance Minister Ingrida Simonyte said high interest in the
issue demonstrated investors’ confidence in Lithuania despite
concerns about public finances of some European states.

“The long debt maturity term and fixed interest rate means
that Lithuania will need to borrow less to refinance its
current debt during the period of post-crisis economic
recovery,” she added.

The new loan was a 10-year bond at a yield of 7.625
percent, and a coupon of 7.375 percent, the Finance ministry

Lead managers were Barclays, HSBC and RBS.

Order books totalled $7-8 billion for the issue, the source
said. The deal was attractively priced, fund managers and
analysts said.

“Lithuania 2015s trade at a low 6 percent, so the 7.625
percent guidance implies a 150-ish basis point pick-up, that’s
a lot,” said Luis Costa, emerging debt strategist at

The yield on the bond launched last year was 6.75 percent.

Lithuania’s gross domestic product (GDP) fell 15 percent
last year, one of the deepest drops in the European Union and
likely to be beaten only by Latvia’s expected 18 percent fall.

Lithuania’s public sector deficit is expected to be 9.5
percent of GDP in 2009, narrowing to 8.1 percent in 2010.

Ratings agency Standard & Poor’s this week raised its
outlook on Lithuania’s rating to stable from negative.

On Thursday it said its rating on the new bond would likely
track the sovereign rating, which it said reflected a clear
commitment to carry out budget policies that anchored the fixed
currency peg of the litas to the euro.

Fitch said it would rate the bond BBB, in line with the
sovereign rating, which has a negative outlook. Fitch said that
though the contraction was bottoming out, the budget deficit
was high and much more consolidation would be needed.

Moody’s said it would rate the bond Baa1, the same as the
sovereign rating, which has a negative outlook.

It also said the deficit would remain high, despite some
stabilisation in the economy. “This will impair the
government’s fiscal flexibility,” said Moody’s analyst Kenneth

Stock Market Investing

(Reporting by Carolyn Cohn and Sujata Rao, additional
reporting by Patrick Lannin; editing by Patrick Graham and Dan

UPDATE 3-Lithuania issues $2 bln 10-year bond-finmin