Even though it’s only the beginning of December, in the second half of this year, corporate bond issuers have conducted public offerings worth over PLN 800 million, with investors subscribing for a total of PLN 1,144 billion. This results in a mean reduction of subscription of 30 percent, concerning only the offerings concluded by December 12, 2023. There is still a month to go, and currently, there are four more public offerings in progress (Kruk, PCC Rokita, Cavatina Holding, and Victoria Dom) for an additional amount of over PLN 180 million. Assuming that these are completed in full, we have about PLN 1 billion in public offerings in the second half of this year.
In the second half of the year, we had 20 public corporate bond offerings, and another 4 are in progress. A core of regulars in the bond market can clearly be seen, as we have 11 frequently recurring issuers among these 24 offerings. The two largest offerings during this period were conducted by Kruk, respectively for PLN 75 and 90 million, both of which ended with reductions (39 and 9 percent). Kruk, the largest bill collection company in Poland, recorded exceptional results, listed in WIG20, so the high interest in Kruk’s bonds should not be surprising.
The next record holder in terms of amount is Ghelamco, a commercial developer, which after its first public offering this year for PLN 75 million, ended with a reduction amounting to 44 percent, immediately proceeded with another offering, this time for PLN 50 million. The second one also ended with a subscription reduction, this time at 55 percent.
Only 3 out of 20 completed offerings did not end up fully placed and reduced. The first of these is Marvipol, which collected PLN 55.5 million from a PLN 60 million offering. In this case, we had to deal with a quite substantial amount for a developer’s offering, and this is where the source of such a state of affairs should be sought. The second of the offerings is Best, a debt collection company, which raised only PLN 19 million from a PLN 50 million offering. In this case, we can definitely speak of a failed offering. It is worth noting here that two of its previous offerings for PLN 20 and 30 million ended with significant reductions of 39 percent and 20.6 percent, respectively. The third is an offering by Kredyt Inkaso, which raised PLN 37.7 million out of the planned PLN 50 million.
The “high-amount” offerings group is closed by Echo Investment with an offering for PLN 50 million (reduction 28 percent), as well as the ongoing offering of another residential developer, Victoria Dom. This final offering ends on December 13, and it will be possible to sum it up a few days later.
Investors are surely attracted to the public offerings market by several factors. One of them is undoubtedly the interest rate. The least of the mentioned issuers “pay” is PCC Rokita, Kruk and Echo Investment, respectively 3.20 percent and 4.00 percent over WIBOR. The most pay Budlex Finance, Cavatina Holding and Kredyt Inkaso – respectively 6.50 percent, 6.00 percent, and 5.50 percent over WIBOR. Thus, the average interest rate over WIBOR for public offerings in this half-year was 4.91 percent (based on completed offerings).
Currently, another 4 public offerings are in progress, including the highest in terms of amount this half-year, Victoria Dom for PLN 100 million. Apart from that, there are additional offerings by Cavatina and PCC Rokita. Additionally, we have another “overtime” offering by Kruk in EURO. After the success of the first one, which ended with a reduction of over 70 percent, where the demand for a 5 billion euro offering exceeded 17 billion euros – Kruk immediately proceeded with a supplementary offering. The total of these offerings is another over PLN 186 million. It is hard to estimate likely reductions at this moment, but considering their average level this year – they are probably possible.
The total value of completed public offerings in this half-year is over PLN 800 million. Offerings for another PLN 186 million are in progress. This makes a total of PLN 988 million in public offerings in 2H2023. In 1H23, the value of these offerings was PLN 300 million – giving a total of PLN 1,288 billion in public offerings in 2023.
Investors evidently fell in love with corporate bonds this year. This is indicated by both the high demand (reductions) and the large supply (large number of offerings). All public offerings this year had variable interest rates, i.e., their interest was based on WIBOR. High-interest rates and expectations regarding their future level certainly favor the corporate bond market. Especially when they don’t realize the credit risk (issuer default). Many issuers still have active issuance prospectuses, the limit for non-prospectus issues is currently 5 million euros (previously 2.5 million euros), and the market clearly shows interested investors and issuers. It seems that we can look at 2024 with optimism.
Author: Szymon Gil, Broker of Securities, Certified International Investment Analyst (CIIA). Michael / Strom Dom Maklerski.
