HERE AND BEYOND
In 2008, Ameriabank successfully implemented the “Imex Group” Ltd bonds subscription
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ArmInfo

In 2008, Ameriabank successfully implemented the “Imex Group” Ltd bonds subscription totaling 1 billion AMD and quarterly coupon yield of 11.5% per annum. The bonds were distributed among wide range of investors. The owners of these bonds have an opportunity to redeem the bonds by their nominal values as of October 13, 2009. The bonds have been listed at Bbond NASDAQ OMX Armenia platform, and Ameriabank is their market maker. It is distinctive that according to January results these bonds doubtlessly have a leading position among the corporate bonds circulating on the stock exchange market. This highlights the professionalism of Ameriabank as a bond market maker.

Ameriabank provides its customers with a comprehensive package of all investment services including operations on the capital markets, mergers and acquisitions, corporate finance, trade, merchant banking (securities and foreign exchange operations) and asset management ( individuals and legal entities` funds management - trust management, pension and insurance funds management, development of various pension plans for companies). This year, the bank will enter the market with private pension plan projects. If relevant legislative acts are present the creation of equity funds will also become a novel service for Armenia. It is a type of collective investments, a financial instrument through which the funds of a large number of investors are united in a fund created especially for this purpose, which is managed by the specialists of a dedicated managing company.

On all investment services the bank receives professional support from affiliated Russian investment company “Troika Dialog” which has been the leader in providing investment services in the post soviet region for already several years.

- How would you assess the present condition of corporate bonds market? What are the prospects of its development under financial crisis? Will the financial crisis affect profitability and volumes of corporate bonds issuance?

- It is natural that the financial crisis does not foster the progressive development of corporate bonds market – however, just like one could expect already a year ago, the situation in Armenia is better than in many countries worldwide. The thing is that the potential of corporate bonds market in Armenia is not used in full and even in the present condition it has quite good prospects. In my opinion, under conditions of financial crisis there will be a certain slowdown in the corporate bonds market, but, this year, issuers will enter the market and hopefully with our help too. No doubt, the crisis will affect both profitability and volumes of issuance, and probably the profitability will increase in consonance with interest rates on loans, because the issuing of corporate bonds is one of the alternatives to debt resources attraction. It is difficult to predict the current year volumes of issuance. It is noticeable that investors have some alertness, but in my opinion there will be activeness anyway.

- What is the advantage of attracting resources through bonds issuance over bank loans?

- One of the advantages is the secondary trading, that is, a bond is a tool circulating on the exchange market, and it may be bought and sold until the end of the redemption period, whereas in the case of a loan this is practically difficult to do. Based on this very position Ameriabank concentrates on the implementation of the market maker function in reality and not just in words, because it is the possibility of buying and selling throughout the entire period of stock turnover that makes it an attractive tool for investments. In addition, from the issuer`s viewpoint the bonds issuance provides an access to a wider range of investors.
In the long term, in international practice the main if not the only means for large companies to attract large amounts of funds is to issue securities – bonds and stocks, public or private, since a bank, as a rule, has some limitations in terms of providing credit resources based on the risk norms, such as single borrower risk, etc., which makes bonds an actually irreplaceable tool for debt financing attraction. In case of issuing bonds the issuer unlike a bank loan deals not with a single but with many creditors, and the risk is allocated among them.

- Why do our issuers prefer corporate bonds and do not take the risk of Initial Public Offering (IPO)?

- As a rule, many of Armenian companies’ founders do not want to divide their share, preferring to grow on account of the profit, although many realise that it doubtlessly limits the opportunity of growth and development. And still, the fear to lose control often prevails which in many ways in the result of the present condition of corporate governance and market economy institutions development level. Apart from that, the culture of public company business management is not formed. Even while issuing corporate bonds the company should turn public, the investors should receive full information on the company activity; get introduced to financial reports and so on. In case of public issue of shares grows the necessity for the company`s “openness”, as well as the volume and content of information provided to investors. For this reason in my opinion it is quite natural and even logical that the corporate bonds market develops first and only then comes the stock market. There are companies interested in the shares issuance, however, we would suggest them to start with corporate bonds issuance and only after that to develop an IPO plan, because the corporate bonds issuance is easier and more affordable. The crisis also forces us to be more cautious about both the potential issuers and the choice of services which we want to suggest in the market. Successful and complete bonds placement within wide range of investors is very important for us whether the underwriting is guaranteed or not, because it is the reputation of our bank that we have to uphold.

- Have you considered the opportunity to insure the subscription for bonds?

- If we consider the international experience of bonds insurance, we will see that overall it is only developed in niche sectors, for example, in the USA municipal bonds are insured mainly due to taxation specific features. Apart from that, insurance companies were also insuring the services of many institutions up to the recent sad events in this market and today, under the financial crisis, these companies appeared in quite a severe condition. This is the first reason to be cautious. The second factor is the transparency of companies and thereby the low level of insurers` possibility and consequently willingness to assess the risks of issuers and to undertake those. For example, the insurance of banking deposits is a comparatively easier procedure because the banks` activity is more transparent and they are under the regulator`s constant control. Still, as of today Ameriabank is the only bank in Armenia which succeeded to involve a large insurance company Rosgosstrakh for insuring the full amounts of deposits. Thus overall I do not think that in the near future the corporate bonds will be insured in Armenia.

- How do you assess the operation of exchange market? Does the activeness in the market have to do with integration into NASDAQ OMX Group?

- No doubt, the appearance and advancement of NASDAQ OMX Group in Armenia is a very positive factor which fosters the development of the debt liabilities market. In general, I assess the operation of the exchange market and the formed relevant operational infrastructure as quite positive. The most important is that there should be issuers, investors in the exchange market, and not in the last place, there should be market makers who will be eager, and what is very important, able to use that infrastructure. The development of corporate bonds market should not be necessarily attributed to the structural integration of the national exchange market into the NASDAQ OMX Group. High level of responsibility for the market development lies on the participants themselves, for example, on the market makers. We are the market maker of the “Imex Group” Ltd bonds, and these bonds are very actively circulated on the exchange market. For example, in January, 94% of transactions on the corporate bonds market falls upon the Imex Group bonds. We do not only target bonds` successful placement but also teach Armenian companies to invest their spare resources into securities for even short terms and get income because there is an effective market maker in the market.

Thank you for the interview.

 

Updated 08.04.2014, 14:42
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