Two weeks ago, the Serbian oil company, Naftna industrija Srbije (NIS), received approval from its shareholders to issue corporate bonds worth 5.85 billion dinars (approximately €50 million), with the possibility of later listing them on the Belgrade Stock Exchange.
However, not everyone can invest in these bonds. In addition to a minimum investment of €100,000, investors must submit an application and wait for an invitation from NIS’s designated broker for this transaction, Dunav Stockbroker. We spoke with Professor Nikola Stakić from Singidunum University to discuss whether NIS will successfully place all the bonds and how they may perform on the stock exchange.
The procedure for purchasing the bonds is relatively simple. According to the instructions published by NIS on their website, investors must first express interest by submitting their contact details to two provided email addresses. Following this, they will receive an invitation to purchase the bonds from Dunav Stockbroker, also via email.
The next step is to open a shareholder account at a brokerage firm, if the potential investor does not already have one. After signing the application form and transferring the required funds, the bonds will be credited to the investor’s shareholder account.
When asked whether NIS will be able to place the entire bond issuance worth around €50 million, Professor Nikola Stakić explained that the coupon rate is a key factor to consider. “The net coupon rate, after tax deductions and various fees, will be around 5.5%. The base coupon rate is 6.5%, which makes this an attractive yield for a company with the credit rating that NIS has. I believe that demand will exceed the relatively modest size of the issuance,” Stakić told Biznis.rs.
He expects that the primary buyers will be institutional investors, especially existing alternative investment funds and other institutions with investment policies that allow them to invest in corporate bonds. However, regarding the “second life” of the bonds – the potential for later inclusion on the Belgrade Stock Exchange and their attractiveness in that market – Stakić reminded that corporate bonds typically appeal to “buy and hold” investors, particularly those dealing with higher-rated issuers.
“This is especially true when the issuers are of a high investment grade. Still, secondary market activity could arise, particularly if there is a significant drop in interest rates, which would positively affect the market price of the bonds. Corporate bonds, however, do not offer the same liquidity as government bonds. Liquidity would likely be higher if the investment threshold were lower (below €100,000), which would allow for a broader base of individual investors,” Stakić concluded.
The bond issuance will be considered successful if at least 30% of the planned amount is subscribed and paid within the designated period. If the issuance is unsuccessful, any paid amounts will be refunded to the investor’s bank account within three business days after the subscription deadline.
In the case of a successful issuance, NIS will submit a request to approve the prospectus and list the bonds for trading on the open market segment of the Belgrade Stock Exchange, the company announced in a statement.
