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Serbia: Telefonija places a call to moribund bond market

Pioneering issue attracts institutional demand; Proceeds to fund gas project

Engineering and telecommunications company Telefonija is preparing to launch Serbia’s first fully fledged corporate bond this month. Bankers hope other issuers will soon follow it. Aleksandar Malisic, head of investment banking at arranger Raiffeisen banka, says that the company is awaiting the final sign-off from the Serbian securities commission before taking a YD200 million (€2 million) four-year issue to market.

Malisic reports that the deal is already attracting strong buying interest from institutional investors such as insurance companies and pension and investment funds, keen to see a new instrument on the market. The transaction will offer an eye-catching yield of 750 basis points over 12-month Euribor. "We have structured the bond in compliance with both the issuer’s needs and the potential investors’ expectations, so as to bring the maximum benefits and minimize the risk for both sides," says Malisic.

Vladimir Pavlovic, portfolio manager at Fima Invest, who is acting as a financial adviser on the issue, says that it provides a viable alternative to bank loans, which have previously been the principal source of corporate funding in Serbia. Although there has been sporadic issuance of short-term commercial paper with a tenor of up to 12 months, Telefonija’s issue will be the first fixed-income instrument to raise medium-term funding.

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