Банкеръ Weekly



DSK Bank managers fixed the terms for preparing and offering a mortgage bond issue on the market. By the end of February internal rules should be settled and the issue parametres should be determined - amount, face value, collaterals, etc. If the Council of Ministers approves the issue, it should be registered on the stock exchange until the end of March.
According to the Law on Additional Pension Insurance (adopted last October), pension funds are allowed to invest up to 10% of their money in mortgage bonds. Their long term-to-maturity combined with a minimum risk makes them attractive for investors who are interested in long-term investments such as pension funds.
DSK Bank is one of the major shareholders in Rodina pension company. The managers of the two companies announced last December that they were preparing a mortgage bond issue and Rodina would participate in its realization. Rodina's executive director, Daniela Vladimirova, is also one of the authors of the Law on Mortgage Bonds.
Mortgage bonds are much more reliable than bank deposits as they are entirely guaranteed by receivables on mortgage credits, thinks Mrs Vladimirova. At the same time they are a bit riskier than government securities and should therefore bring a higher yield. Probably it will be commensurable with the municipal bonds yield (about 9.75%).
Mortgage bonds will probably be issued with a floating interest rate because mortgage credits, launched by banks, have such type of rates too. The principal will be depreciating and will not be paid as a lump sum on the maturity date, in accordance with the structure of the banks' morgage credit portfolios.
The mortgage bond law was based on the European models for mortgage financing and mortgage bond issuing, explained for the Banker weekly Mrs Vladimirova. The only risk undertaken by bondholders is the risk of a possible great fall in real estate prices, but only in case that the bank becomes insolvent, receivables on the credits are not collected anymore and the collateral needs to be realized.

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