The FINANCIAL — Bank of Georgia has issued Eurobonds of 250 million USD with an interest rate of 7.75 percent, which is 1.25 percent less compared to the previous Eurobonds issue.
The FINANCIAL — Bank of Georgia has issued Eurobonds of 250 million USD with an interest rate of 7.75 percent, which is 1.25 percent less compared to the previous Eurobonds issue.
The net proceeds of the bond issue will be used, among other things for general working capital purposes and will help the Bank to optimize its average cost of funding
The bonds have been admitted for trading on the London Stock Exchange.
“Demand from various banks and funds for Bank of Georgia’s Eurobonds was quite high,” said Irakli Gilauri, CEO of Bank of Georgia. “This time we have offered our Eurobonds in the USA as well, unlike our previous Eurobonds. 35 percent of Eurobonds were sold in the USA, 30 percent in the UK and the rest in both Europe and Asia.”
The coupon price of Bank of Georgia’s five year Eurobonds is 7.75 percent which is less than the Eurobonds of Standard Bank or Alfa Bank in Russia.
“This is the cheapest coupon of the last 15 months in CIS countries,” Gilauri claims. “It means that trust toward Bank of Georgia is very high. The less the coupon percent on the bonds of Bank of Georgia or any other Georgian company, the easier the access to capital in Georgia will be.”
The management of the Bank is not going to spend the majority of the money in the loans. This money is supposed to help reassess liabilities and eventually reduce interest rates. Bank of Georgia has balance of 4.7 billion USD. 1.3 billion out of the whole amount is cash funds. Now after issuing new Eurobonds, the Bank’s cash balance will total 1.55 billion USD.
“Such an increase of liquidity will cheapen our resources. This will happen over the period of a year,” he added.
Credit Suisse Securities (Europe) Limited, J.P. Morgan Securities Ltd. and Merrill Lynch International acted as Joint Lead Managers and Bookrunners for the Notes. Dechert LLP and Baker & McKenzie LLP acted as legal advisors to the Joint Lead Managers and the Bank, respectively. The Notes are rated BB- (Fitch) / Ba3 (Moody's) / BB- (Standard & Poor's).
The average interest rate for short-term loans in Georgia is 33.6 percent in total, while the number is 19.3 percent for long-term loans, according to the National Bank of Georgia.
As well as Bank of Georgia two more Georgian companies including Georgian Railway and Georgian Gas and Oil Corporation have issued Eurobonds lately. Georgian Railway issued Eurobonds of USD 500 million and Georgian Gas and Oil Corporation – USD 250 million. In total USD 1 billion has flowed in to the country recently. This will significantly support the attraction of more investors and capital.
In July 2012, Georgian Railway bought back 88.99 percent of existing USD 250 million Eurobonds through a tender and issued new USD 500 million Eurobonds with a 7.75 percent coupon, payable semi-annually. The bonds have been admitted for trading on the London Stock Exchange as well.
On 15 June 2012, Bank of Georgia entered FTSE 250 and FTSE All-share indices. In order to qualify for membership of the FTSE 250 Index, the Bank has been required to meet a number of criteria, which cover factors such as market capitalisation, free float and average daily trading. The FTSE index helps investors worldwide make informed investment decisions and benchmark the performance of their investments.
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