Slovenia’s Nova Ljubljanska Banka (NLB) is in the preliminary stages of issuing the first Slovenian covered bond, which could help it refinance outstanding government guaranteed debt, according to Fitch.

Fitch reported in June that NLB was considering a debut covered bond programme backed by public sector loans of up to Eu600m as part of the bank’s refinancing plans. Officials at the bank confirmed to The Covered Bond Report that NLB is planning to issue a covered bond, but declined to comment further.

The rating agency noted that NLB has a Eu1.5bn government guaranteed bond maturing in July 2012. Lindsey Liddell, credit analyst at Fitch, told The Covered Bond Report that NLB had prepaid some of the government guaranteed bond, but still had about Eu1.1bn left.

“That’s clearly a very large sum for a single Slovenian bank to refinance at any one time, particularly given the difficult operating environment at present,” she said.

Launching a covered bond was said to be one of the ways in which to refinance this sum.

“We understand the covered bond is one of the ways that they are looking to manage their refinancing spike,” said Liddell.

“Given what’s going on generally in the market,” she added, “the name of the game really is funding diversification, by both source and tenor of funding, so that would be a motivation for NLB to look into issuing a covered bond.”

Liddell said that given that this would be Slovenia’s first covered bond, it seemed sensible that one of the larger state owned banks, like NLB, was pursuing this endeavour.