Банкеръ Weekly

Briefs

EUR25MN BOND ISSUE FOR PLOVDIV MUNICIPALITY

The Plovdiv Municipality issued bonds with a total nominal value exceeding EUR25MN, to be managed by Raiffeisenbank Bulgaria for a term of 15 years, with the real average life of the bond being 7 years. The fixed interest coupon is 2.875% on an annual basis. The municipality's effective annual interest expenses, fees included, will be 3.87%, at that without punitive interest, with a 4-year grace period for absorption of the principal and a 2-year grace period for the fees. Repayments of the principal will be made in 22 equal six-month instalments. The first tranche of EUR5MN will be at the disposal of the municipality still in the beginning of November 2006. The contract was signed by Plovdiv's Mayor Ivan Chomakov and the bank's executive directors Momchil Andreev and Evelina Miltenova.
The procedure for the choice of a financing institution lasted for some four months, with 10 crediting institutions and international consortia participating in the contest. The municipality's financial managerial team has entrusted the difficult task to select the most advantageous among them. Extremely fair terms were reached in the course of negotiations with Raiffeisenbank, which can be compared with European practices, the bank's Executive Director Momchil Andreev pointed out. The agreed bond issue is the biggest one, ever received by a Bulgarian municipality. Plovdiv's Mayor Ivan Chomakov confessed to the BANKER weekly that so far the municipality had borrowed interest-free credits from the State alone, but not during his term of tenure. I just had the luck to repay them and part of them were cancelled. The bond issue we have just signed is the first financial instrument, realized by the municipality in the last 10-15 years, he added.
Raiffeisenbank's Executive Director Momchil Andreev admitted to the BANKER that quite a circumstantial preliminary conversation was held with the municipality in order to decide if it should be extended a bank credit or a bond loan. One of the effects of the bond issue is that a broad range of investors, both institutional and natural persons may invest in the Plovdiv Municipality.
If the issue is successful at a later stage the municipality will be able to open up to new sources of financing because the loan is of a big size, at that it is in euro. That makes possible to sell not only in Bulgaria but abroad as well and we have already registered it in Europe. Many foreign investors deposit their money in Bulgaria through the mediation of Raiffeisenbank and therefore we maintain contacts with a wide range of institutional investors who show interest towards such financial instruments, said Mr. Andreev. He is adamant that the loan will help Plovdiv to apply for the EU funds also because the municipality managed to close a very good financial deal with European terms. It's a matter of calculations and needs if the municipal authorities ask for a new bond issue, taking into consideration the set proportions of indebtedness. Moreover, the Plovdiv Municipality has a very serious mechanism for controlling the absorption of money, Mr. Momchilov added.
Raiffeisenbak's Regional Director for Plovdiv Kostadin Iliev said the financial institution has four branch offices in the second largest Bulgarian city at present and two more should be opened by the year-end. A pilot image project has been implemented in Plovdiv as well, specifying how the bank's branches and offices all around the country should look like in the future. Raiffeisenbank has extended in Plovdiv credits exceeding BGN200MN. As a man born in Plovdiv I am glad to note that the credits are being serviced extremely well and a very law percentage of them are overdue, Mr. Andreev commented.

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