The corporate bonds market, still in its early stages in Romania, has received an unexpected yet decisive boost from the enforcement of the Romanian consolidated capital market law last week.
Discreetly, by means of a phrase in an article (291, paragraph f), the consolidated law abrogates the provisions of the trading companies' law that restricted a company's bond issuing capacity to 75% of its share capital.
Practically, as far as the law is concerned, companies are no longer bound to abide by a certain limit, with investors left to decide whether the bond issue is risky or not.
The representatives of the potential issuers and brokers believe dropping this limit is a decisive step towards the development of the corporate bonds market in Romania, currently worth a mere 50 million euros.
"Prior to the sanctioning of the new law there had been three obstacles standing in the way of the corporate bond market's development. These were the 75% cap; the restriction on upping the value of the issue by no more than 15% after its launch; and the need to have the issue underwritten. Two of the three obstacles, the 75% cap and the 15% restriction, have now vanished and this will have visible effects on the market," says Dragos Neacsu, chairman of Raiffeisen Capital & investment, the investment banking division of Raiffeisen Bank Romania.
Raiffeisen Bank and Banca Romana pentru Dezvoltare (the Romanian Development Bank - BRD) account for more than 90% of the Romanian corporate bonds market, due to their bond issues in ROL (the equivalent of 34 million euros and 13 million euros respectively), released this year. BCR, ING, the SIFs and foreign investment funds were the main purchasers of such bonds. The interest paid varies in line with the BUBID/BUBOR interest rates on the banking market, plus several percentage points.
Whereas share capital was not a problem for these two banks, the low number of companies that have resorted to this method to raise cash shows things are not the same for the rest of the market.
At present, only Impact Bucharest (a residential complex developer), TBI Leasing and BCR Leasing have outstanding bond issues, but theirs are small, ranging between the ROL equivalent of 1 to 3 million euros.
"The talks we've had with potential bond issuers showed the 75% cap was one of the main barriers hindering the progress of this market. There are many dynamic companies with large volumes of activity that could not gain access to funding by bonds because they had overlooked the share capital issue, which is in any case an anachronistic notion on the developed markets," said Razvan Pasol, chairman of Intercapital Invest, the brokerage company that handled International Leasing's two issues so far.
laurentiu.ispir@zf.ro ; vlad.nicolaescu@zf.ro
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