Armenia’s capital market is having a breakthrough. The Central Bank, the financial sector regulator in Armenia, has yielded to years-long solicitations from Armenia’s investment banking community and officially allowed issuance and placement of USD denominated corporate bonds. So, for the first time USD-denominated corporate bonds are issued in Armenia and traded on NASDAQ OMX Armenia. Why does this fact deserve attention? Experts say this is a landmark event that will trigger the development of Armenia’s corporate bond market and will attract diverse groups of investors.
SAS group of companies, a leading consumer goods retailer in Armenia, has pioneered issuing Armenia’s first USD-denominated corporate bonds to further finance its expansion in Armenia and the region.
Ameriabank of Ameria Group of Companies, a leading bank in Armenia, has acted as the lead underwriter for SAS bonds. Ameriabank announced the closing of its books and successful placement of the largest corporate bonds issue ever done in Armenia from December 2012 through January 2013.
SAS bonds have USD 10 face value, a coupon of 10.1% per annum to be paid twice a year and a maturity term of 24 months. The total volume of this issue is USD 7 million. Experts say the nominal yield of 10.1% annually on these bonds is high, whereas the bond par value is pretty low. What makes it all remarkable, aside from setting a precedent in Armenia, is that with USD 10 par value per bond, this kind of investment is accessible to every Armenian locally and worldwide.
If you don’t speak “the language of bonds,” don’t let it stop you from understanding and seeing the benefits of investing in SAS Group corporate bonds. Here are some of the basics. When bonds are issued at par they are offered at their face value. Bonds have a maturity date which is the date when the issuer pays to the bondholder the face amount of the bond. Bondholders also receive periodic interest payments as coupons. Let’s take the SAS Group bonds example with an annual coupon rate of 10.1 %, paid semiannually, and a par value of USD 10. In this particular case at the end of each coupon period, every six months, the bondholder will receive $ 0.505 per each USD 10 invested. After receiving all available coupon payments the bondholder will also receive its USD 10 back at the maturity date.
So, what’s in SAS bonds for you? Many find the return on investment in SAS bonds of 10.1% coupon rate rather promising. Another question that might come up is the security of such investment. When you do research on the parties that initiated the largest USD-denominated corporate bonds issue in Armenia, you come across two established companies – SAS Group, known as a leading retailer in Armenia and Ameriabank of Ameria Group of Companies, a leading bank with dynamic growth in Armenia. Taking into account the history and the growth of both companies, the issued bonds’ profitability becomes even more attractive.
Both SAS and Ameria managements confirm that the issuance of bonds has created a buzz, attracting Armenians from Armenia and the worldwide Diaspora. Arno Mosikyan, Investment Banking Director at Ameriabank, says the initiative has been a great success and beneficial for investors of all scales: “Through bonds we will have a new way of attracting foreign investments into Armenia. Bonds enable to earn high interest on your investment with a flexibility to sell these bonds on NASDAQ OMX Armenia any time before the maturity date. The difference between time deposits and the bonds is that if you take out your deposit before the maturity date, your earned interest rate is usually recalculated by the bank at a lower rate which is not the case with the bonds.”
Summing up, if you want to test the waters for investing in Armenia, SAS-Group bonds can be the way to go. And the good news is that now you can find these bonds on NASDAQ OMX Armenia as they are already listed there and Ameriabank makes the market.
SAS-Group (sasgroup.am.) has been one of the leaders in Armenia’s consumer goods retail market since 1995. SAS-Group currently operates seven SAS supermarkets and two SAS Home stores. It is renowned for having become the first supermarket chain in Armenia open 24/7 and launching the first online supermarket in Armenia at www.sas.am.
Ameria Group (ameriagroup.am) is Armenia’s premier financial and advisory services provider with dynamic growth within and beyond the borders of the country. Ameria Group of companies offers comprehensive financial and advisory services to clients of almost all sectors of economy, with major focus on financial services, management and legal advisory, investment banking, asset management, private equity and property development services. Ameria Group has more than 550 employees, around $ 600 million dollars in assets, branches across the country and a representation in the United States. Ameriabank is a winner of many international financial awards by Euromoney, Global Finance, and The Banker. Ameriabank is the 2nd leading bank among Armenia’s 21 banks by its net profit, assets, loan portfolio, deposits and total capital.
Neither the issuer nor the bonds are FDIC insured and SEC registered. Ameriabank CJSC is not registered with FINRA. This is not a public offer to buy SAS Group bonds. Readers must seek qualified and licensed financial advisors’ advice before making investment decisions. Both resident and non-resident to Armenia investors are subject to a withholding tax of 10% which applies to the gross coupon payment at 10% rate.