m2 Issues Corporate Bonds

m2 Issues Corporate Bonds

The FINANCIAL -- m2 has issued the first USD-denominated corporate bonds in Georgia. The initiative will enable the company to receive an alternative source of financing. At the same time bondholders will receive an almost two times higher interest rate than the standard deposit offered by commercial banks.

The maturity of the bonds is one year. Nominal cost per bond is USD 1,000. Annual interest rate is 9.5%, taxable. Meanwhile, the annual interest rate on term deposits offered by the majority of commercial banks operating in Georgia is 5%.

The high level of trust in m2 makes the management of the company optimistic that this initiative will be successful and that other private companies will follow its lead.

“There could be various reasons behind the lack of popularity of bonds on the Georgian market. Lack of knowledge and information could be two such reasons. However we are optimistic that the initiative of m2 will be successful and that subsequently, other companies will follow our example,” Irakli Burdiladze, Chairman of the Supervisory Board, m2, told The FINANCIAL.

“We are interested in growing and developing the bond market in Georgia. People will get used to diversifying their risks and companies will have more access to additional financial resources as a result,” said Burdiladze.

In Burdiladze’s words, “Bondholders will be able to resell the bonds on the secondary market. Bank of Georgia was the first to start issuing corporate bonds in 2005. Unfortunately, only two companies have followed this initiative,” he said.

m2 bonds are eligible for individuals who open a term deposit at Bank of Georgia or purchase a deposit certificate. Consequently, they need to place one part of their money on a term deposit and the other part - on buying a bond.

Bondholders will be able to enjoy special discounts with projects managed by m2 Real Estate.

“We never start construction of any apartment house till the funding structure is completed. We attract financing first and start construction only after that. The demand for our apartments is high. 65% of apartments on Kazbegi Avenue is already sold. 77 apartments out of 221 have been realized on Nutsubidze. We will start constructing another apartment house on Tamarashvili in the summer of 2014,” said Burdiladze.  

According to Burdiladze, m2 will soon announce a new project which involves an offer of two-room turn-key apartments with kitchen installed for USD 29,000.