CJSC STARTS ISSUING THE FIRST CORPORATE BONDS OF NON-FINANCIAL SECTOR IN ARMENIA
Yerevan, December 21. ArmInfo. In December 2006, the Armenian CJSC,
the leader in construction materials production in Armenia, issued
nominal, undocumentary, discount bonds. This is for the first time
an Armenian manufacturing venture enters the open securities market
with corporate bonds. The Armenian Central Bank has recently decided
to register the issue prospectus of these securities, after which
the public bond placement will start.
The company told ArmInfo that the total nominal value of the bonds
will make up 160 mln AMD. The bonds will be placed in four equal
tranches worth 40 mln AMD. Each tranche consists of 4 thousand bonds
worth 10 thousand AMD per bond. The annual bond yield of the first
tranche is fixed at 9%. According to a preliminary estimation, the
proceeds from the sale of the first tranche will make up 36 697 248
AMD. This sum will be directed at refinancing of the company’s debt.
The underwriter of the issue will be the "E-Capital Asset Management"
CJSC. The bond turnover is 365 days starting from the last day of
placement.
At the moment, the CJSC produces construction materials, paints,
putty, it is also engaged in construction and trade of construction
materials. The company is also planning to establish new types of
production.
By September 30, 2006, the company’s proceeds from the sale made up
1 462.0 mln AMD, and in 2005 – 1 243.2 mln AMD as against 1 073.1 mln
AMD in 2004. The net profit totalled 272.3 mln AMD as against 36.1 mln
AMD in 2005 and 201.9 mln AMD in 2004. According to the specialists of
the company, in Jan-Sept 2006 the volume of sales increased by 17,6%,
while the net profit grew by 653,5%. The high rates of profit growth
are explained by the decrease of the cost price.
The specialists of the CJSC inform the future bond-holders about the
potential risks, such as possible lack of well-organized liquid market
of bonds in Armenia, the possible fluctuation of interest rates on
the financial market. The company also admits that some changes may
take place on the construction market of Armenia, though over the past
few years this sector of economy has been steadily developing. Some
risks may be connected with failures in supply of raw material for
the production.
To remind, at the end of 2004, the holder of 24% of ‘s shares
worth 850 thsd EUR became the European Bank for Reconstruction and
Development, which bought 12% more shares of the enterprise in July,
2005. These are the first investments of the EBRD in an Armenian
private industrial enterprise. The rest of the shares belong to the
company’s top- managers. To note, the Armenian Central Bank, which
has been awarding ratings to various non-commercial enterprises of
the country since last year, gave "B" high rating to the CJSC. The
CB specialists estimated the company’s financial activity by 3.86
points, the quality of the activity – 4.5 points, the average mark is
4.18 points. In this connection, the CB is ready to accept the bonds
issued by the company as security while concluding REPO-agreements
with commercial banks. This considerably contributes to the increase
of the bonds’ liquidity and gives investors an opportunity to enter
the market of alternative financial instruments.