Банкеръ Weekly



INVESTBANK is the tenth Bulgarian credit institution to attack the bond market. On October 18 its shareholders gave a permission to its Management Board to launch on the market several issues of bonds with an aggregate par value of EUR10MN. The securities will be both mortgage bonds and ordinary bonds (without collateral). Their concrete parameters, e.g. term of maturity, size of interest rate, and period within which it shall be paid, will be specified by the credit institution's Management Board. In the last two years issuing of bonds began to gain popularity as an opportunity for banks to attract money from the financial markets for a longer period of time. The first debt instruments (securities with a total par value of EUR3,242,000) were issued on August 1, 2001 by Bulgarian-American Credit Bank (BACB). Since then bank bonds in Bulgarian currency, euro, and US dollars, worth an aggregate par value of the equivalent to BGN178,12,000 have been marketed. Banks sell their securities primarily to corporate clients - pension funds and investment companies, which are attracted by the interest rates (bewteen 4.75% and 8%), which are higher than those on interbank deposits (between 2% and 3%) and on government securities (between 4.3% and 5%). The citizens and most of the firms are still sceptical towards the new financial instrument. According to some bankers, the trust of small investors will increase only after the first issues of bonds are paid off. In fact, we'll witness such an event on October 27, which is the redemption date for First Investment Bank (FIB) to pay off the principle of its 2-year issue of mortgage bonds with a total par value of EUR5MN, launched on October 25, 2001.

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