Банкеръ Weekly



The first issue of municipal bonds - of the Sliven Municipality - was launched on the floor of the Bulgarian Stock Exchange (BSE) on October 16. This is the first case of primary offering of municipal securities, effected directly on the exchange. So far only bonds of the Svishtov Municipality have been traded on the capital market, but it was secondary trade.The issue is worth a total of BGN3MN, but in order to register it as successful paper worth BGN2MN at least should change hands. In case less bonds are sold, the issue will be cancelled. The 4-year bonds are offered at their par value of BGN1,000/apiece. They bear a 9% yield, payable each six months. This interest is considerably higher than the yield of banks' mortgage bonds. But unlike the latter, the bonds of the Sliven Municipality are not collateralized and as a whole municipal paper is considered more risky. A guarantee for the investors is the municipality's fair financial state. A hint for it is the fact that the issue's value is below 10% of the municipality's capital, which exceeded BGN25MN in end-2001. The Sliven Municipality's liabilities totalled BGN1.3MN by September 30, 2002. This debt has been accrued mainly by overdue social assistance payments. If the Finance Ministry remits money for such payments (which are an obligation of the municipality), the Sliven Municipality will have no liabilities at all.The bonds issue has been prepared and launched on the stock exchange by the investment broker - Unity Invest 99, which became known by marketing the issue of bonds of the Svishtov Municipality.

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