Construction supplies producer Prefab Calarasi’s bond issue is the first failure of a Romanian company to sell bonds and raise cash for its operations in three years.
The public bond offering carried out for two months and a half and extended twice during that time, failed to allure buyers to purchase 60% of it, so that the offer could be considered successfully concluded.
“One of the reasons for this failure is the bad timing with the market,” Prefab’s head Marian Milut says. He explained it took the National Securities Commission (CNVM) no less than nine months to endorse the issue, so that the company was forced to try to sell its bonds during the summer, when the appetite of the investors on the capital market is lower. Milut was unable to say exactly how much the bonds subscribed were worth, but specified a number of individuals had announced plans to buy several tens of thousands of dollars in bonds.
Prefab had intended to sell 16.5bn ROL ($0.5 million) in bonds, and have their value and interests indexed in line with the ROL/USD exchange rate. The annual interest rate was 6.5%, with the maturity set at two years. The repayment of the loan is secured by BCR Asigurari (BCR Insurance) and the cash raised would have been used as extra working capital.
The previous failure dates back to 2000, when winemaker Bachus Buzau was unable to sell even 60% of the 15.5bn ROL bond issue.
The main bond investors on the Romanian market are the banks, the mutual funds and the financial investment companies.
“We didn’t have enough information on the company at the time the issue was released and a company’s history with the capital market is very important whenever it tries to sell shares or bonds,” says Iulian Panait, analyst with Certinvest, a company that manages three mutual funds. Another possible cause for the failure is the fact that many institutional investors would rather make their investments in national currency, keeping away from those indexed in line with a specific foreign currency.
vlad.nicolaescu@zf.ro