VALLETTA RELUCTANT TO POSTPONE ISSUE OF CORPORATE BONDS

ArmInfo
2009-03-28 11:56:00

ArmInfo. Due to devaluation expectations, Valletta Company, the
leader by the number of bonded loans, was reluctant to revise its
plans for the issue of the 4th tranche of corporate bonds. Valletta
Acting Financial Director Hayk Kakoyan says the company has postponed
this plan till the stabilization of the monetary market. ‘Potential
investors and the population have no free funds to invest in debt
securities. Even the banks in Armenia have suspended consumer lending’,
he said.

Prices of the third-issue bonds of Valletta have been falling in the
market recently. Arkady Pinachyan, Head of the Department for Corporate
Finance of ArmSwissBank, the market maker of Valletta, told ArmInfo
the fall of prices is connected with two major factors. First, coupon
payment on March 2 contributed to a 7.2% fall of the price for the
period from Feb 26 to March 3. Since the interest income (coupon) is
included in the price of a bond, it sharply falls after payment. Second
and the key factor of the fall of the debt securities prices is the
growth of devaluation expectation in the country. This will lead
to passivity in the market and freezing of the issuers’ plans for
entering the market with new issues. He said that after the national
dram sharply devaluated on March 3, demand for AMD bonds has plunged.

To recall, after successful repayment of the first tranche, the second
and the third issues of Valletta LLC corporate bonds are in the stock
exchange lists. In particular, the primary placement of the second
issue of non-documentary nominal coupon bonds for 500 million drams
was on November 12 2007. The face value of a bond is 50,000 drams
(10,000 bonds), maturity – 24 months, coupon yield – 10.5%.

Coupon payments are made once in 6 months. 10,000 non-documentary
nominal bonds of the third issue for 500 million drams, with 36 months
maturity and 50,000 drams face value were placed in the primary market
on July 28 2008.

The annual yield of the bonds is 11%. Payments are made once in
6 months.