Oradea will soon launch the largest issue of municipal bonds in Romania’s post-war history. Also, the bonds will have the longest maturity ever recorded in Romania. Oradea plans to borrow 150 billion ROL (4.5 million dollars) from the capital market, a loan that will be paid back after six years. The intermediaries of the public offering will be two brokerages, a first time for the Romanian market. The two companies are BCR Securities, the brokerage belonging to Banca Comerciala Romana (Romanian Commercial Bank – BCR), and CA IB Securities, held by HVB Bank.
The total vale of municipal bonds issued so far revolves around 700 billion ROL, but 60-70% of this amount has been underwritten by the financial groups whose brokerages handled the transactions. This is also the reason why BCR and HVB have decided to set up an underwriting syndicate.
“The decision to set up an underwriting syndicate is meant to cut risks, because banks may be left with most of the bonds in their portfolios,” said Valerian Ionescu, head of operations at CA IB Securities. He also specified that the two banks and the local authorities in Oradea had signed an agreement according to which the two sides pledged to equally take over the securities that would not be underwritten.
Another novelty with this issue is that the interest calculation formula yields a higher interest rate than in previous bond issues. Oradea will offer three points above the average passive and active interest of the inter-banking market. Municipal bonds carrying a variable interest that have been issued so far offer 1-2% above the average interest on the inter-banking market. “The interest carried by the Oradea bond issue is higher since its maturity is longer as compared to previous issues,” explained Simona Constantinescu, head of BCR Securities.
vlad.nicolaescu@zf.ro