Банкеръ Weekly

Briefs

BULGARIAN EUROBONDS - A PRIVILEGE TO BIG PLAYERS

It will be difficult for Bulgarian citizens and companies to buy Eurobonds from the first Bulgarian issue. The banks would hardly lose the fat job in order to buy on behalf of their clients packages of Eurobonds below EUR10,000. And such an investment is beyond the solvency not only of of most of the citizens, but also of a great part of the local small and medium-sized companies.The alternative for them is to invest in products based on the acquired Eurobonds, to be launched on the Bulgarian market by the local banks and investment underwriters. It is said that some financial houses intend to offer on the Bulgarian Stock Exchange depository receipts, issued on the base of the Eurobonds.It is possible for some banks to offer to their clients saving deposit packages, whose yield would be higher than that of the ordinary deposit and would depend on the Bulgarian Eurobonds.Three Bulgarian banks - BULBANK, Bulgarian Post Bank, and United Bulgarian Bank (UBB) - have participated as co-managers in the distribution of securities from the issue and were able to acquire them at the most advantageous prices - EUR9,885.5 per EUR1,000 par value. It is said that BULBANK purchased bonds worth more than EUR10MN, playing jointly with its major shareholder - the Italian bank UniCredito.Bulgarian Post Bank bought Eurobonds worth EUR3.5MN, bidding in the tender jointty with the Greek EFG Eurobank, which is a sharehokder in the Bulgarian credit institution and hold 86.24% of its together with the US insurance giant AIG.UBB acquired Eurobonds worth EUR10MN by bidding in the tender together with the National Bank of Greece, which holds 89.9% of its capital. UBB also used the services of Balkan Consulting Company, owned by Alex Bebov and Vladimir Karolev. UBB has immediately sold out most of the acquired shares - worth EUR8MN - to 15 Bulgarian banks, pension funds, and insurance companies, and kept for itself the balance of bonds worth EUR2MN. As per the terms of the agreement with the issue's managers, we sold the bonds to our clients at the price at which we had acquired them - EUR9,885.5 per EUR1,000 par value. We'll get a commission exceeding EUR6,000 for that service. Our participation as a co-manager of the issue was intended to have an advertising effect, rather than a big profit, Marin Atov, Director of the Treasury Department at UBB, told the BANKER weekly.The issue of EUR250MN was presented to the foreign investors at a moment when they were drawing their capitals from the precarious markets in Latin America. Bids for it exceeded EUR1.08MN.At 8.30 a.m. on November 12 (Monday), Bulgaria entered the world capital markets. The Bulgarian Eurobond issue of par value EUR250MN was purchased within 10 minutes, Finance Minister Milen Velchev announced on his return from London after the first road show of the Bulgarian Eurobonds issue. The Eurobonds were purchased at 98.855% of their par value. The more curious fact is that this percentage corresponds to three kinds of bonds with par values fixed at EUR1,000, EUR10,000, and EUR100,000. On March 1, each year the owners of the securities will get a 7.25% interest. The first payment is due on March 1, 2003, and will be a little higher than the others as it will include the November 12, 2001 - March 1, 2002 period. It is a five-year issue. Its maturity is on March 1, 2007. Bonds were bought by: German investors - 35 per cent, Greek investors - 25 per cent, 10 per cent were divided between English investors and US offshore companies. Bulgarian investors purchased 10 per cent, the Finance Minister specified.The managers of the Bulgarian Eurobonds - Morgan Stanley and J.P. Morgan should get a commission of 0.55% on the bonds' par value. The securities will be registered on the Luxembourg Stock Exchange within two weeks. The US investors will be able to trade these shares in 40 days (after November 12, 2001 onwards).Before starting our road show in Europe to present the issue I said that the commission for its managers would be 0.45% of its par value, but this concerned an issue with a 3-year maturity. The commission in 0,50% for 4-year securities, and 0.55% - for 5-year bonds, Finance Minister Milen Velchev explained to teh BANKER weekly.All formalities regarding the legalization of the bids for the purchase of Bulgarian Eurobonds will be completed within a week, by the so-called closing day. On that day the agents - Chase Manhattan Bank of London and Morgan Stanley of London - will stop the issue's distribution and the buyers will remit the money to Chase Manhattan Bank, which is Bulgaria's payment and fiscal agent. EUR247,212,500 will go to Chase Manhattan Bank's accounts as per the negotiatedd price of 98.855% of the bonds' par value. EUR1,375,000 (the commission for the managers J.P. Morgan and Morgan Stanley) as well as the cost of the road show (which will not exceed EUR100,000) shall be deducted from that amount. The balance of EUR245,737,500 will be remitted by Chase Manhattan Bank to the Bulgarian Government's account at the Bulgarian National Bank as a part of the country's fiscal reserve. However, the managers of the Bulgarian Eurobond issue - the banks J.P. Morgan and Morgan Stanley - shall not keep the entire amount of commission to themselves. They will distribute part of it between the co-managers - nine in number.

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