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Thu 4 Nov 2010 05:23 PM

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Jordan minister sees bond issue boosting FDI

Jordan seeing strong demand emerging for issue; bankers says offering is at least $500m

Jordan minister sees bond issue boosting FDI
The kingdom also has strong economic and business ties with the Gulf states, especially Saudi and signs of regained investor confidence are helping Jordan get more foreign inflows. (ITP Images)

Strong demand for Jordan's upcoming debut Eurobond issue will help a rebound in FDI, underpinned by the country's macro economic fundamentals and political stability, the finance minister said on Thursday.

Ahead of a London roadshow that will pave the way for the launch of the country's sovereign debt offering, Mohammad Abu Hammour told Reuters he was confident the proposed bond issue would attract a "wide range of international and regional investors."

"We will test maturities and appetite but I have no doubts the offering will be a very strong vote of confidence in the Jordanian economy and the demand will reflect that," he said.

Bankers say the amount and interest rate as well as other details will be determined during the placement that has begun with roadshows in the Gulf and will end in London this week.

The minister did not disclose the size of the issue but investment bankers said they expected Jordan was seeking not less than $500m depending on the level of demand and the right pricing.

On Monday Moody's said it assigned a BA2 rating to the proposed senior unsecured bond while Standard and Poor's Ratings Service said it assigned it a BB long-term debt rating.

Credit agencies and analysts say the economy is underpinned by strong Western donor support and geopolitical factors that provide an economic and political cushion for the country.

The kingdom also has strong economic and business ties with the Gulf states, especially Saudi Arabia and signs of regained investor confidence are helping Jordan get more foreign inflows, officials say.

Abu Hammour said he was confident of "very competitive pricing" amid signs of a recovery in Jordan's economy and strong political support for a tough fiscal consolidation plan.

Jordan has since last July said it sought to tap international markets to capitalise on healthy global demand for sovereign issues from emerging markets.

Abu Hammour said the issue was not just to fund the deficit and would help inject funds to spur investments with plans to raise capital spending in the 2011 budget to spur growth.

As foreign capital inflows rise with an improved business climate helped by corporate tax cuts and other measures along with an improved regional sentiment, real growth should not be less than 4 to 5 percent next year, from a low of 2.3 percent in 2009.

"The measures we have taken to stimulate the economy and attract foreign investments should help raise growth to well above 4 percent. The outlook for next year is already looking much better," Abu Hammour added.

Abu Hammour said he was confident the offering would be closed successfully this month as lead-managers, JP Morgan, HSBC and Arab Bank/Credit Suisse consortium, finalise the placement

He said he believed the timing of the issue was favourable.

As Jordan is not a regular issuer, the offering could also create a sovereign curve and a more active secondary market in government debt paper, Abu Hammour said.

Abu Hammour said there were favourable developments in Jordan's debt structure over the last five years as it tapped lower cost domestic borrowing to tap idle liquidity.

The country's total debt stood at end of August at 10.4 billion Jordanian dinars ($15 bn) or 54.2 percent of kingdom's projected GDP for next year. This was well below its regional peers.

Major IMF guided structural reforms in the last decade has transformed Jordan into one of the region's most open economies after a crisis in 1989 which sent it's debt above 180 percent.

"Despite the impact of the global downturn on our fiscal situation our debt situation remains very comfortable," he said,

Abu Hammour said Jordan was beating fiscal 2010 goals set with the IMF, with the budget deficit on target to drop by 3 percentage points to around 6 percent this year by undertaking some of the toughest spending cuts in years.

It should fall to 5 percent of GDP next year, he added.

Last year ended with a record deficit of 1.45 billion Jordanian  dinars ($2 bn) or 9 percent of GDP, blamed on years of big spending by previous governments during a boom period that saw high aid levels and an investment and real estate bubble.


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