In July and August, issuers carried out 5 issues for a total amount of just under PLN 200 million. Nearly 6 thousand investors made subscriptions for PLN 560 million in them, and the average level of reduction was over 50 percent. Financial sector was dominated – two issues from Best windication and one from PragmaGo. Other issues were also carried out by developers – Victoria Dom (residential developer) and Olivia Fin (commercial developer).
Issues completed in July and August
Why sleepy summers when the demand was there, reductions were necessary, and 6,000 investors is more than a regiment? In the first half of the year, we saw 25 issues for a total of PLN 1.1 billion, and investors made subscriptions for PLN 2.44 billion. Hence, PLN 200 million in 2 months is not a spectacular result. Of course, the issuers could have partially met their debt needs in the first half of the year, demand is also not inexhaustible, and holidays are generally more peaceful.
Issues conducted during the holidays of 2023
However, even in the significantly worse year of 2023 during holidays, issuers carried out 8 issues for a total amount of PLN 300 million, with investors’ subscriptions at the level of PLN 410 million. It is noticeable that market, issues, and issuers are losing momentum from the beginning of the year – Kruk announces that it is unlikely to come out with more issues this year, Ghelamco exhausts its public issue program. On the other hand, new program for PragmaGo (PLN 500 million) is being approved; Financial Supervision Authority accepts the prospectuses of Best (PLN 250 million) or Olivia Fin (PLN 150 million), and these companies go to the market with issues.
At the same time, two more public issues are coming to an end at the beginning of September – Cavatina Holding (commercial developer) is using the option to increase the issue from PLN 20 million and ends it with PLN 38.68 million. PragmaGo, on the other hand, comes out with another, “overtime” issue, and collects PLN 78.97 million at the issue of PLN 30 million.
On the third hand, during vacation, investors pay another net PLN 769 million to corporate bonds funds, and since the beginning of the year over PLN 3.5 billion. From January this year, about PLN 1.3 billion were invested in public issues of corporate bonds, with a demand of PLN 3 billion. Perhaps part of the money from reduced funds investors simply redirect to corporate bond funds. Meanwhile, this closed system (large reductions + large inflows to funds) strongly benefits issuers, who can lower margins. An ideal example here is PragmaGo, which still at the beginning of the year was paying 5.15 percent above WIBOR for the bonds, and in the last issuance, admittedly secured, was paying only 3.50 percent. There are more examples – 5.25 percent margin vs 4.95 percent for Victoria Dom; Echo Investment from 4.00 percent to 3.80 percent or Olivia Fin for issues in euro from 5.30 percent to 4.70 percent. Lower margins can in turn discourage investors, and thus potentially reduce demand.
Growth of assets from bond funds
The average rate of return on corporate bonds funds was 0.60 percent in August and 8.70 percent from the beginning of the year – which still seems to be satisfying levels. Positive returns and net asset inflows should mean the dynamic growth of assets of corporate bonds funds. And without a doubt, it would be like that (increase of PLN 600 million in July, and since the beginning of the year until the end of July over PLN 3.8 billion), if we did not record a decrease in assets of PLN 1.3 billion in August despite results and inflows. Thus, during the holidays, they fell by almost PLN 600 million. Changes carried out by Santander TFI, which merged two debt funds and then changed the investment policy of the newly formed one, affected the results from August. It was a “technical” change, but it affected the growth trend of this class of assets.
After the issues completed at the beginning of September by PragmaGo and Cavatina Holding, the issuance calmness fell. Best mentioned about a new issue, and a large number of issuers still have active issuance prospectuses. It seems that the third quarter may be the worst this year compared to PLN 350 million of public issues in 2Q and PLN 760 million in 1Q.
Author: Szymon Gil, Investment Advisor, Certified International Investment Analyst (CIIA), Michael / Ström Brokerage House
Source: https://ceo.com.pl/wakacyjne-spowolnienie-na-rynku-obligacji-korporacyjnych-62048
