Azerbaijan, Baku / Trend / Active action of the Government of Azerbaijan in issuing sovereign Eurobonds encouraging Azerbaijani banks and large companies to join foreign market and attract long-term finances abroad.
For instance, over the recent months, the State Oil Company of Azerbaijan (SOCAR) shared this position in its plans. SOCAR. By the end of the year, the SOCAR plans to use the services of Citigroup to receive ratings to issue Eurobonds. Thus, the high oil prices and favorable conditions in the export markets make SOCAR the leading candidate to issue Eurobonds.
In addition, Azerbaijan Investment Company JSC plans to issue Eurobonds in 2009. For this purpose, in 2007 the Company will begin attracting credit resources, and in 2008 process receiving credit ratings from Moody's Investor Services and Fitch Ratings.
In regards to the banks, the International Bank of Azerbaijan already plans to issue first Eurobonds in 2007 in the amount of $200mln. Further, Kapital Bank is going to issue Eurobonds totaling AZN 12mln by the end of 2007.
However, it needs to be noted that issuing emissions is still only possible for few large Azerbaijani companies. Firstly, because the risks of the Country are more important than the risks of the companies, only large companies with high ratings are capable to attract foreign investors in the developing market. It is difficult for the companies known only locally to join European markets. In Azerbaijan many popular consultations companies which offer services on assessment of borrowers try to define its credit capacity.
The worldwide practice shows that the governmental Eurobonds need to be issued earlier than the period when the corporate Eurobonds grow in the market. The problem is that if the country does not issue State Eurobonds, it is difficult to attract foreign investors. The Government of Azerbaijan states that placing first State Eurobonds defines base conditions for the further access of the Azerbaijani securities to the foreign markets. Thus, the rates on Eurobonds which are planned to be issued by the Ministry of Finance will be based on the Azerbaijani corporate Eurobonds.
The success of the corporate Eurobonds will depend on the success of the debut issuance of the Governmental Eurobonds and on assessment of the rating by known rating companies. It is not doubtful that the Azerbaijani securities will join the world financial system because mainly the demand for them will be presented by the growing interest of the international community in Azerbaijan's economy.
The first Eurobonds are planned to be issued by the Ministry of Finances in September-October 2007. The Presidential decree approving implementation of the 2007 State budget envisages issuing Eurobonds in the amount of AZN 249mln. According to the initial conditions, the Eurobonds will be issued for the period of five years and with 2% interest rate.