on the market long-term securities have a special type of debt called Eurobonds.Borrowers on them are the governments, large corporations, international organizations and some other institutions, interested in attracting financial resources for a sufficiently long period of time and at the lowest cost.For the first time, these tools have appeared in Europe and have been called eurobond, due to which today often referred to as "Eurobonds".What kind of bonds, how is their release and what benefits they give to each participant in this market?Answers to these questions we will try to detail and clearly addressed in the article.
concept and main characteristics of Eurobonds
In simple words we can say that it bonds issued in a currency different from the national currencies of the lender and the borrower, and placed simultaneously in the markets of several countries (with the exception of the issuing country).They are, as a rule, to raise funds for the long term - up to 40 years.There are short-term Eurobonds issued for a year or three or five, and medium-term - a period of ten years.
Eurobond market participants
There are special institutions to place Eurobonds.What is the structure?This is an international syndicate of underwriters, which includes financial institutions of different countries.At the same time the national legislation of their release, and turnover are regulated in a limited manner.There are also issuers (governments, international and national structures) and investors (financial institutions - insurance companies, pension funds, etc.).All participants included in the International Association of Capital Market (ICMA) - a self-regulating organization based in Zurich.Clearstream and Euroclear are used as a depository and clearing systems.
There is a special directive of the Commission of the European Communities, which provides full legal definition of this instrument, governs the rules and procedures of emissions offers on the market.According to her Eurobonds - is traded securities that have a number of features:
- the need for passage of underwriting and placement through a syndicate at least two members of which belong to different States;
- their offer made in large volumes in the markets of several countries (but not the country of the issuer);
- originally purchased through a credit institution or other approved financial institution.
Properties
Eurobonds Eurobonds - what kind of paper and what the characteristic features they have?First, each has a Eurobond coupon that gives the investor the right to receive interest on the bonds at a certain time.Secondly, the rate of interest may be both fixed and variable (depending on various factors).Third, the payment of interest may be provided in a currency other than that in which the loan was involved.This is called a dual denomination.In addition, it is important to know the number of other features such securities, namely:
- is bearer securities;
- placed simultaneously in several markets;
- available for a long time - usually 10-30 years (up to 40 inclusive);
- the currency in which to borrow, and a foreign issuer and the investor;
- eurobond has a nominal value of US dollar equivalent;
- coupon interest payments made without deduction of tax;
- placed Eurobonds emission syndicate, which includes banks, brokerage houses and investment companies in several countries.
Eurobonds - one of the most secure financial instruments, but because their customers are usually financial institutions such as investment companies, pension funds, insurance companies.
history of the emergence and development of the Eurobond market Eurobond issue
the classic layout for the first time was carried out in Italy in 1963.The Issuer is a state road construction company Autostrade.It was taken by 60,000 bonds with par value of $ 250 each.It is because the original Eurobonds appeared in Europe, and to this day the bulk of the trafficking is carried out in the same place, the name of the paper has the prefix "euro".Today, it is more a tribute to tradition than a real characteristic of the instrument.
active development of the market took place in the 80s.Then especially popular Eurobonds bearer.Later, in the 90s, they began to "harass" euronotes - medium-term nominal bonds issued by developed countries and having (as opposed to the Eurobond) software.It was connected with the growth of the market capitalization and the strengthening of the status of the main borrowers.Then their share in the total issuance of Eurobonds reached 60%.
At the end of the 20th century appeared on the market large bond loans, called "jumbo".Liquidity Eurobonds increased, while the largest borrowers in the face of US government agencies and national entities increased interest in this financial instrument.In addition, due to the global crisis and default on loans to the government a number of countries in South America, the role of bonds in comparison with bank loans increased.There has been a process of so-called "flight to quality" as investors prefer safer investment than high-yield investments with a sufficiently serious risk.
Eurobonds today
Today Eurobonds are not less in demand.The main objective of the output issuers in this market - the search for alternative sources of funding (in addition to traditional domestic, in particular, bank loans), as well as the diversification of the loan.In addition, there are a number of advantages enjoyed by Eurobonds.What are these "profits"?Firstly, the cost savings in connection with raising capital (up to 20%).Second, fewer different kinds of legal formalities and obligations assumed by the issuer.Third, there are practically no restrictions on directions and forms of use of the flexibility of the market and others.
Eurobond Issue and
There are various options for placement of the Eurobonds, the most common - public subscription.It is done through a syndicate of underwriters, and the issues are listed on the stock exchange.After the initial sale are "thrown" by dealers on the secondary market, where they can be purchased over the phone and through the Internet at investment companies.Like any investment vehicle, have Eurobonds quotes and their yield, which depend on supply and demand in the market.However, there is another option issue - limited accommodation among a certain group of investors.In this case, bonds are not traded on an exchange (no listing).
Eurobonds Russia: current situation
the first time, our country has entered the international Eurobond market in 1996.The first issues of debt of this type were carried out over 96-97 years.Then the right of their placement under certain conditions got two subjects of federation - Moscow and St. Petersburg.Today, the participants in this market are the country's largest corporations, "Gazprom", "Lukoil", "Norilsk Nickel", "Transneft", "Mail of Russia", "MTS", "Megaphone".It has a significant role as eurobonds "Savings Bank", "VTB" and "Gazprombank", "Alfa Bank", "Rosbank" and others.It is important to note that for Russian companies to enter the market of Eurobonds is limited by national legislation.For joint-stock companies can raise funds with the help of this tool in an amount not exceeding the amount of its share capital.There are also restrictions on the issuance of unsecured Eurobonds (usually requires collateral) and other regulations.Check the reliability of Russian issuers may be according to the specialized rating agencies such as Moody's, Standard & amp; Poor's and others.
Russia annually present on the international market borrowing.Despite the fact that the country has enough of its own sources of funding, according to the Minister of Finance, this is an important event in the Russian fiscal policy.In 2014, the planned one or two access to foreign markets with Eurobonds in dollars and euros, totaling 7 billion. Dollars (allegedly).
Ukrainian Eurobonds: buy and "burn"
Russia participates in this system, not only as an issuer, but also as an investor.In December last year, Russia bought Ukrainian Eurobonds totaling 3 bln. Dollars, becoming the only buyer of this issue.However, such an investment could turn the country is not the best way.Since February this year, S & amp; P and Fitch have repeatedly lowered ratings on Ukrainian eurobonds.What does this mean?Rating bonds reached the level of CCC (pre-default), the value of the market has declined, and the probability of default on them increased.Russia at the same time may require early repayment of the debt, but its position on this issue is weak.In connection with the negative trends in the economy of Ukraine, Russia will not be easy to prove that she was unaware of the possibility of default, the risk of which were registered in the 200-page prospectus.Failure to meet the obligations of Ukraine has a very unpleasant consequences for the country itself, associated with the deterioration of credit history in the international market, the arrest of the property holders of its securities abroad and the inability to enter the debt market of Eurobonds for a long time.Therefore, in the interests of both sides of a positive resolution of the issue of the bond debt.
Conclusion
So Eurobonds - is very reliable, as a rule, long-term investment tools to attract funding on the international capital market.They are placed through a specially regulated by syndicates and supranational structures.Great importance played by the Eurobond market rating agencies that determine the reliability of the financial instruments of any country.Today, Russia is an active participant in the international Eurobond market, acting on it as the issuer and the investor.
