Georgian investors crave for Georgian Railway Eurobonds
11 November, 2010
Georgian investors crave for Georgian Railway Eurobonds

Eurobonds of Georgian Railway LLC successfully traded at London Stock Exchange attracted attention of US investors recently. Numbers of US investment funds are supposed to acquire the bonds via secondary market soon. Georgian financial market analysts thumb up the deal although they regret that the questioned Eurobonds are not put at Georgian Stock Exchange that might give a serious impetus to the sluggish Georgian capital market development.
BG Capital, a corporate broker and market-maker of Georgian Railway LLC, got through with

the four-day road show held starting October 25-28, 2010 in New York, Boston and Chicago and hopes to attract American investment soon.

The road-show aimed to provide 20 leading US investment funds including Templeton Asset Management, Morgan Stanley Asset Management, Fidelity Investments, Eaton Vance, and Citadel with full information on USD 250 million worth Eurobonds issued by Georgian railway in this past July. Moreover, the event envisaged meeting with the current owners of the questioned bonds.
Eurobonds issued by the state-owned Georgian Railway(GR), a monopolist company donating about GEL 100 thousand each year in the state budget, enjoyed a big success at London Stock Exchange (LSE) although were allocated for 10% of interest rate due to lowered country rating of Georgia affected by August war of 2008 and financial crisis.

However the country rating was raised by all rating agencies to the pre-war data in this fall laying ground to more success of GR’s Eurobonds. As an aftermath the interest rate fixed for GR’s Eurobonds was cut down to 7.9% and they were put on the list of the most demanded bonds within the space of developed bond markets.

As BG Capital informed Georgian Journal, they have already traded by about USD 50 million worth Eurobonds starting their allocation date and the interest did not diminish toward the state-owned enterprise’s bonds and although credit terms worsened [reduction of interest rate] during the last two weeks the initial trade value and profit of the questioned bonds are detained. 
“The profit reduced from 10% to 7.9% and it happened when European investors alone were allowed to the trade and their number was somewhat restricted. Now the demand of US investors will be added,” Giorgi Gagnidze, Financial Director of Georgian Railway LLC, said.
US investors are supposed to acquire GR bonds via secondary market [as they could not participate in the trade of Eurobonds] BG Capital believes however neither the volume nor the date of the secondary market allocation is known as of yet.
Georgian financial market players and analysts approve the GR bonds transaction though wonder and regret that they are not traded at Georgian Stock Exchange (GSE). They believe there would be a big run on GR bonds in Georgia where the single investment tool is banking deposit as the capital market is underdeveloped.

“All bond emitter companies put their bonds at local market first of all and only then allocate them at international stock exchanges,” Ditrikh Muller, one of the founders of Georgian Investment Group, a broker company operating at GSE, said. “Reputable companies like Georgian Railway can give an impetus to sluggish local capital market and GSE, how otherwise GSE is supposed to develop? Volume of deposits exceeded GEL 4.6 billion by the latest data because people have no other tool to invest their money more profitably and all of big depositors were supposed to buy GR bonds and I cannot understand why they did not put their bonds at GSE. To my information interest rate fixed for stocks of Bank of Georgia [that allocated its bonds at GSE initially] at LSE are even higher than at GSE. If GR needs money what makes it difference to them who will buy their bonds if the interest rate will be equal and may be even lower at GSE?”

According to Tina Kipiani, Director of BG Capital, the reason GR bonds are not put at GSE is the capacity of volumes demanded by foreign investors, restriction at GSE for foreign investors, as well as high political risk of Georgia due to which custodian financial institutions [that has the legal responsibility for a customer’s securities] prohibit foreign investment funds to trade at GSE.
“Local investors cannot provide with as capacious volume of demands as foreign investment funds, there are not investment funds operating at Georgian market actually only banks are supposed to ask for bonds,” Kipiani told Georgian Journal. “Besides GR allocated GEL 25 million worth bonds at GSE in December of 2010 prior the Eurobonds’ allocation at LSE and banks acquired them. Moreover, custodians restrict foreign investment funds to participate at GSE trade as political risk of Georgia is still estimated high and they prefer to trade by Georgian bonds at international stock exchages.”
Levan Surguladze, Head of Caucasus Financial Service (CFS), Georgian-based investment bank, argues the country risk is estimated equally at GSE and foreign stock exchanges as they are assessed by international rating agencies. Moreover he presumes that the GR bonds allocation at GSE was rather a loan to Bank of Georgia as the latter purchased the entire volume of bonds. He agrees however that local investors cannot provide with as big volumes of demand as foreign investment funds but asserts that allocation of bonds of big and profitable companies like GR at local capital market is essential for they act as a locomotive and can revive the situation at local capital market and GSE alike.
“Besides allocation of bonds at local market makes transaction procedures more transparent that enables to fix better price at international stock exchanges later,” Surguladze elaborated. 
Muller advises to streamline GSE rules so as to enable foreign companies to trade there on the  one hand, and on the other hand to enable local investors to invest in profitable bonds like GR that will boost Georgian economic development  rather than let foreign companies to enjoy high profit via Georgian bonds and bolster their economies.

Other Stories
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
February 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28