SOCAR committed to diversifying its financial portfolio

Azerbaijan’s energy giant SOCAR, which has recently presented its USD bonds for Azerbaijani citizens, is keen to diversify its financial portfolio.

SOCAR Vice-President for economic issues Suleyman Gasimov told Trend that issuance of bonds will make it possible to diversify the company’s financial portfolio, mentioning that presence of financial means in the economic turnover is one of the most essential conditions of economic growth.

Gasimov said that the company has refused more profitable projects in the foreign market and turned its attention to domestic one, the fact, however, does not imply that the company is at a disadvantage, as the measure is an essential component of a thoroughly planned long-term strategy.

SOCAR, which is currently operating on conditions that are less advantageous, may gain in the future, as it is intended to attain two main strategic objectives – establishment of a stable market and diversification of its financial portfolio, according to him.

“SOCAR is now entering the financial market of the country with a new instrument. Initially, conditions of emission should be advantageous to investors [purchasers]. SOCAR will be able to reach a balance between profitability for investors and issuer in the future. The company will earn money from issuing these bonds, probably not directly, but by opening a new channel of financing,” he said.

Gasimov added that creation of a new financial channel in the country will also give an impetus to the diversification of SOCAR’s financial portfolio, which in turn will give an additional advantage to the company during talks with investors and reduce its dependence on separate sources of financing.

The company started issuance of USD bonds for Azerbaijani citizens from September 20. The nominal value of each bond is $1,000, while the total volume of emission is $100 million. The annual bond yield is 5 percent, while interest income is not taxable and will be paid quarterly.

One of the main advantages of SOCAR’s bonds is that their annual interest yield is higher than the rates applied in reference to dollar deposits placed in banks, where the annual interest rate on dollar deposits currently stands at 2.5-3 percent.

Gasimov noted that the 5-percent profit per annum from the funds invested in dollars looks very impressive. The bonds on the primary market will be sold only to Azerbaijani citizens, while foreign individuals and legal entities have a right to buy bonds from their owners on the secondary market. SOCAR refuses buy-out and repurchase of bonds, which means that the company won’t be able to make buyers return the bonds till the expiration of their circulation period and buyers will be able to get profit until its expiration.

Moreover, SOCAR guarantees the liquidity of the issued securities and the possibility of selling them at any time, which is also considered to be an additional guarantee for investors.

SOCAR earlier said that it did not exclude the possibility of issuing bonds in the country’s national currency – the manat in the future. Emission of the manat bonds, which will have a dollar peg is expected to give an impetus for the development of the securities market in the country.

High-interest rate on SOCAR’s bonds has recently raised concerns over the issue of outflow of foreign currency deposits from banks. Head of SOCAR, Rovnag Abdullayev, however, put an end to worries, saying that new bonds will be set at a level below five percent, as the company has no intention to create problems for the operation of banks, which set low-interest rates on deposits.