SOCAR bonds can be source of income for investors

Azerbaijan’s state energy major SOCAR is currently engaged in drafting its annual activity report, while issuance of USD bonds for the domestic market is deemed to be one of the major steps taken by the company last year.

SOCAR head Rovnag Abdullayev told Trend that bonds of SOCAR allowed to set a partnership between the country's citizens and the company.

SOCAR issued some 100,000 dollar bonds with nominal value of each $1,000 in September 2016, while the bond sale on the secondary market was launched on October 18. Bonds of the company quickly gained a high level of market uptake and turned into a key element of the securities market.

This month, the company launched dividend payment to owners of its USD bonds, paying interest yield worth 1.25 million manats (over $ 677,131) on the first day of payment. The interest on bonds is being paid once a quarter. Next payments are scheduled for April 17, June 17 and October 17.

Commenting on what problems the company may face in the process of payment, Abdullayev said that SOCAR is the most reliable duty payer in Azerbaijan.

He stressed that the oil prices on the world market increased twofold in 2016 compared to 2015 and that factor along with others also had a positive impact on SOCAR’s economic situation.

Along with that, the company’s financial condition became more stable and sound as a result of certain changes and actions taken by both the country and the company, according to him.

Abdullayev said that the investors are pleased with the conditions and the profitability level of SOCAR’s bonds, otherwise, there would not have been twice as much demand for the company’s bonds.

“Demand for the bonds released in the amount of $100 million exceeded $200 million. The bonds were issued on very favorable terms, in US dollars, for 5 years and 5-percent-yield per annum,” he said.

Abdullayev stressed that first of all, the funds acquired through the sale of bonds are used to buy back the Eurobonds issued by SOCAR abroad.

“By issuing bonds, at first, we prevent payment of annual interest worth millions of US dollars abroad, so the interest is paid by Azerbaijani citizens, and the currency remains in the country. Second, the interest costs of SOCAR are reduced,” he clarified.

“Third, as we know, Azerbaijani citizens currently keep 80 percent, and perhaps even more of their savings, in US dollars. These are passive savings because they are kept by citizens at home and in vaults. These savings don’t bring any profit either to economy or their owners. Issuance of SOCAR bonds creates conditions for this money, which doesn’t bring any benefit, to get involved in active economy.”

Abdullayev said that SOCAR issued these bonds in the first place for Azerbaijani citizens, so that they can receive income. Therefore, only local natural and legal persons can tentatively subscribe to get these bonds, he noted.

Both local and foreign individuals, as well as companies can buy these bonds on the secondary market, he said.

“Also, given the situation on the capital markets of Europe and the countries of the region, I would say that SOCAR bonds can become a source of income at a high level for foreign investors as well,” the president of SOCAR said.

“Many European banks operate with negative interest, that is, people who have invested funds in these banks get no interest, and even pay them money,” Abdullayev added, stressing that in this regard, SOCAR bonds with a yield of five percent per year may become big source of income for these people.