Timely Solution is Always Right
Egor G. Rusin Deputy Chairman of the Board at Ukrgazbank In spite of political volatility, Ukrainian corporate bonds market is spinning up. The market development is promoted not only by construction boom and related capital investment growth in this sector of economy, but also by business reforming policy pursued by many large companies in accordance with the requirements of the world experience.Egor G. Rusin
Deputy Chairman of the Board at Ukrgazbank
In spite of political volatility, Ukrainian corporate bonds market is spinning up. The market development is promoted not only by construction boom and related capital investment growth in this sector of economy, but also by business reforming policy pursued by many large companies in accordance with the requirements of the world experience.
Issue of this type of securities is already becoming a real alternative to bank loans. However, successful issue of bonds is possible only with consideration of specific market circumstances. It is essential to determine the moment, when the company’s securities are in demand. Ukrgasbank bonds issue in the stock market was an example of such tactics.
UkrGasBank’s entering the corporate bonds market was caused by understanding that the Bank’s bonds will be in demand in the market due to new entrants. The company issued bonds upon establishment of stricter norms and requirements to formation of insurance and non-government pension funds’ reserves. Naturally, Ukrainian bonds market faced the need of high-quality and reliable financial instruments. The management staked on conservative investors (insurance companies and non-government pension funds) expecting to provide stable financial liabilities.
The announcement of such market player as UkrGasBank issuing bonds in the total amount of UAH 100 million could not have come at a better time, and prospective investors were not backward in announcing their intentions to the Bank’s management. Due to the timely tactic decision, the Bank was able to choose among competitive bids. A decision was made to carry out an auction. As a result, in particular, the bond value was established (UAH 997.25). At the time of the bonds placement, the bond yield was 13.05%. This figure shows the investment potential of Ukrgasbank, and the existing money value trends in the Ukrainian market.
Money borrowing at the expense of bond placement allowed expanding the consumer lending. This is one of the priority areas, just as it is for the majority of system banks. However, the Bank’s management considers the issue of bonds to be an element of the borrowing policy. It is not inconceivable that in relation to the consumer lending boom, the Bank will expand borrowing in future, including, among others, international and financial markets.
Issue of own bonds contributed to strengthening of Ukrgasbank image as a stock market player. The bonds were immediately recognized liquid that is proved by the sales results. For example, in September, Ukrgasbank bonds were ranked 4th by sales volumes in the First Stock Trading System (PFTS). This gives evidence of high investment appeal of these securities. According to PFTS rating, Ukrgasbank is regularly among the 3 leading traders in Ukrainian debt instrument market.
For 9 months of 2006, Ukrgasbank acted as an underwriter on corporate bonds issue in the amount of over UAH 250 million. There are producing, trading, and construction companies among its clients. The Bank provides full range of services to its clients related to issue and placement of corporate bonds. At the same time, the Bank guarantees bond placement, and in individual cases, the Bank may act as its clients’ bonds market maker.
Such thoughtful approach provided Ukrgasbank with stable client base of bond issuers. Before issuing bonds, the Bank’s specialists perform due diligence of the client considering any and all aspects of the client’s activities. This allows choosing the optimal alternative for corporate bonds issue with consideration of the stock market situation and specific features of the client’s business. The investment policy pursued by Ukrgasbank (NBU Licence # 123 as of 19.11.2001) is oriented towards active use of debt instruments for its own purposes and in favor of its clients.
Deputy Chairman of the Board at Ukrgazbank
In spite of political volatility, Ukrainian corporate bonds market is spinning up. The market development is promoted not only by construction boom and related capital investment growth in this sector of economy, but also by business reforming policy pursued by many large companies in accordance with the requirements of the world experience.
Issue of this type of securities is already becoming a real alternative to bank loans. However, successful issue of bonds is possible only with consideration of specific market circumstances. It is essential to determine the moment, when the company’s securities are in demand. Ukrgasbank bonds issue in the stock market was an example of such tactics.
UkrGasBank’s entering the corporate bonds market was caused by understanding that the Bank’s bonds will be in demand in the market due to new entrants. The company issued bonds upon establishment of stricter norms and requirements to formation of insurance and non-government pension funds’ reserves. Naturally, Ukrainian bonds market faced the need of high-quality and reliable financial instruments. The management staked on conservative investors (insurance companies and non-government pension funds) expecting to provide stable financial liabilities.
The announcement of such market player as UkrGasBank issuing bonds in the total amount of UAH 100 million could not have come at a better time, and prospective investors were not backward in announcing their intentions to the Bank’s management. Due to the timely tactic decision, the Bank was able to choose among competitive bids. A decision was made to carry out an auction. As a result, in particular, the bond value was established (UAH 997.25). At the time of the bonds placement, the bond yield was 13.05%. This figure shows the investment potential of Ukrgasbank, and the existing money value trends in the Ukrainian market.
Money borrowing at the expense of bond placement allowed expanding the consumer lending. This is one of the priority areas, just as it is for the majority of system banks. However, the Bank’s management considers the issue of bonds to be an element of the borrowing policy. It is not inconceivable that in relation to the consumer lending boom, the Bank will expand borrowing in future, including, among others, international and financial markets.
Issue of own bonds contributed to strengthening of Ukrgasbank image as a stock market player. The bonds were immediately recognized liquid that is proved by the sales results. For example, in September, Ukrgasbank bonds were ranked 4th by sales volumes in the First Stock Trading System (PFTS). This gives evidence of high investment appeal of these securities. According to PFTS rating, Ukrgasbank is regularly among the 3 leading traders in Ukrainian debt instrument market.
For 9 months of 2006, Ukrgasbank acted as an underwriter on corporate bonds issue in the amount of over UAH 250 million. There are producing, trading, and construction companies among its clients. The Bank provides full range of services to its clients related to issue and placement of corporate bonds. At the same time, the Bank guarantees bond placement, and in individual cases, the Bank may act as its clients’ bonds market maker.
Such thoughtful approach provided Ukrgasbank with stable client base of bond issuers. Before issuing bonds, the Bank’s specialists perform due diligence of the client considering any and all aspects of the client’s activities. This allows choosing the optimal alternative for corporate bonds issue with consideration of the stock market situation and specific features of the client’s business. The investment policy pursued by Ukrgasbank (NBU Licence # 123 as of 19.11.2001) is oriented towards active use of debt instruments for its own purposes and in favor of its clients.
02.11.2006