BCR Finance, registered in Amsterdam, has been licensed byLuxembourg market supervisory authorities to start issuing bonds tocover BCR's foreign currency needs.
BCR, the biggest domestic bank, is getting ready to tap into theinternational capital market in a bid to raise as much as 3bneuros, after its parent company, Erste Group, has provided it withthe foreign currency amounts it needed during the three years sinceprivatisation.
In spring, BCR set up a specialised vehicle registered in theNetherlands, BCR Finance, to raise financing particularly fromforeign markets, and the Luxembourg financial sector supervisoryauthorities have recently approved the prospectus through whichthis entity is to issue bonds with various structures andmaturities up to 3bn euros.
The dealer and arranger for the bond issues will be Erste Group,while the Luxembourg subsidiary of BNP Paribas Securities has beenappointed as broker on international markets.
Why this change in the way BCR secures its foreign currencyneeds?
Erste Group representatives say the parent company has pledgedto support its subsidiaries, but at a cost that should reflect theliquidity premium and country risk. That is, since the crisis hasdeepened, BCR had to pay a bigger price for the foreign currencyprovided by Erste on the rising country risk premium forRomania.
The Austrians say BCR could get financing at more favourablecosts from alternative sources, such as the bonds the bank is toissue on the Luxembourg market and even on the Bucharest StockExchange for RON resources.
As almost 55% of loans released by BCR are foreign currency ones(mainly in euros), foreign currency time deposits cannot cover theentire financing need, particularly on the corporate segment, asthe basic strategy of Erste group requires. Only 33% of depositsattracted by BCR are denominated in foreign currency.
Through the issue prospectus, BCR shows its intention to keepits solvency above the 10% threshold during this year, as requiredby the NBR and the IMF.
In the new crisis conditions, the bank has prepared an emergencyplan for liquidity management in special situations, stipulatingvarious potential scenarios and procedures to monitor and coverliquidity risks.
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