July 19 (Bloomberg) -- Belarus, a former Soviet republic bordering Russia and the European Union, may have to offer investors a "hefty premium" to sell its debut foreign-currency debt after Ukraine cancelled its sale last week, according to Renaissance Capital.
The country may need to offer a premium "in excess of 200 basis points" over Ukraine debt, or a yield of about 9 percent for five-year bonds, "in order to ensure a smooth placement," Renaissance analysts Petr Grishin and Nikolai Podguzov wrote in a research note today.
Belarus hired BNP Paribas SA, Deutsche Bank AG, Royal Bank of Scotland Group Plc and OAO Sberbank for a debut Eurobond offering and met foreign investors earlier this month for a potential sale as the country seeks to bolster its finances after export revenue tumbled. The sale may happen this week, according to Renaissance.
There is "less certainty about the market's assessment of Belarus's risk," after Ukraine canceled its dollar bond sale last week, according to the report. Still, the country's "ability to print the deal is greater than in the case of Ukraine" because of support from Sberbank and "exemplary" fiscal discipline, it said.
Ukraine abandoned plans to sell its first Eurobond since 2007 as investors sought yields of more than 9 percent. That was more than the government was willing to pay after it struck a second loan agreement with the International Monetary Fund.
The government of Aleksandr Lukashenko, who has run Belarus since 1994, shelved plans to issue Eurobonds in November 2008, citing the global financial turmoil. The country turned to the IMF for a $3.5 billion bailout loan instead to meet spending commitments after export revenue slumped.
Belarus is rated B1, four levels below investment grade, by Moody's Investors Service and an equivalent B+ by Standard & Poor's, the same level as Bosnia & Herzegovina and Uganda.
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