- SOCAR has issued bonds for Azerbaijani citizens for the first time. Why is that only now has SOCAR made such a decision?
- SOCAR has issued Eurobonds for foreign investors three times so far and those issuances and were greeted by great interest. Later on, we decided to issue bonds for our citizens because it is important to have our citizens earned more instead of paying dollars to the foreigners. On the other hand, our practice in foreign financial markets diversifies our financial channels and we introduce new investment opportunity to our citizens. For this purpose, a relevant infrastructure was formed in the domestic market. Until recent times, the interest rates in Azerbaijan were higher – 20% and this situation was unproductive for us. At that time, we were able to borrow loans in 2,4,5,6 percents. But now, as domestic and foreign interest rates are close to each other, this is useful for us. Today, the citizens save 80% of their charges in dollar and those charges are saved at homes. Therefore, we issued SOCAR bonds in US dollar in order to involve those funds in the active economy.
- What are SOCAR bonds? Who can buy them and how? What conditions and features do they have?
- SOCAR bond is a loan agreement signed between SOCAR and investor. The main advantage of the bonds is that there is no any mediating financial organization in here. That’s, the company can buy the investor’s money or capital for relevant price as they sell. These bonds have been issued electronically and the registration is carried out in the National Deposit Centre. The bonds have a strong status in international and local law. Because is something happens to the issuer company, the bond owners have superiority before the shareholder. Therefore, the funds to be got in that situation are firstly paid to the bond owners. Then, they are paid to the shareholders with the means in the balance. Our government supports issuance of the bonds. Our bonds are exemption from all taxes for citizens. The bond owners may sell or change to cash anytime. SOCAR has set up all system and infrastructure for this and will prevent bond owners from facing financial loss. All individuals and legal entities in Azerbaijan can get the bonds. This is a privilege for local investors.
Foreign investors will get these bonds from the secondary market. The individuals will have superiority compared to legal entities and no person or body (organization) will have special privilege including SOCAR employees. Those who want to sell bonds may apply to ASAN Service #1 and 5. In those centres, SOCAR will have permanent points and necessary support will be provided to the bond owners. SOCAR will provide liquidity of the bonds for 5 years and will prevent the investors from facing financial losses. SOCAR is able to buy $100 million-bonds back on the next day of the issuance date. Our citizens will not face loss. They will be able to sell their bonds to SOCAR for the price of purchase. SOCAR’s bonds are SOCAR’s obligations in accordance with the legislation and according to the item #1.7 of the SOCAR Charter, he Company bears liability for its obligations with the assets at its disposal.
I’d also like to note that the deadline for sale of SOCAR bonds is October 10 and number of bonds is limited. We recommend those who intend to buy bonds not to wait till the last days.
- Does this step of SOCAR aim to support the strengthening of capital markets in Azerbaijan or spend the funds from the sale of bonds for repayment of SOCAR’s internal and external debts?
- Issuance of SOCAR bonds mainly aims to have citizens got share in profits of SOCAR and its companies. At the same time, the bonds aim to direct the passive funds to the active economy. We plan to continuously introduce reliable and profitable investment opportunities to our citizens. According to President’s order dated May 13, 2011, a State Program on “Development of securities market in Azerbaijan” was approved. This order directly related to development of the financial markets in Azerbaijan. According to that program, we put up SOCAR bonds for sale on September 20. We also plan to introduce other bonds and alternative investment instruments in the future.
A part of funds from sale of these bonds will be spent for buying Eurobonds back.
- Recently, media reports that SOCAR has a large number of borrowings and are unable to repay them. Would you inform about current financial situation of the company? Does SOCAR have any problem in borrowing?
- SOCAR has not any problem in borrowing. Even, SOCAR is able to borrow loans for five years at 2-3% despite we sell bonds at 5%. SOCAR is the most reliable company in Azerbaijan with AZN 40 billion assets, AZN 13.5 billion shares, AZN 1.6 bilion authorized capital, 18 operating companies and 36 joint ventures. On the other hand, the practice of borrowing for implementation of projects is well-known and world’s large companies prefer to borrow at low interest. SOCAR has never created problems with repayment of loans.
- One of the issues on the agenda is SOCAR privatization. Is there such a plan?
- This issue is not on the agenda. President also clarified this issue in Davos and stated that SOCAR will not be privatized. SOCAR is state-owned company and it has special state privileges. SOCAR attaches a strategic importance for Azerbaijan. But, as you know, SOCAR has 36 joint ventures, 18 operating companies and many holding and enterprises. SOCAR may put up shares of these companies for sale. Because the citizens must have an access to the capital market, which serves development of the financial market in the country. SOCAR has partnership with Tekfen, Saipem, but our main goal is to sell a part of our shares, because this process is useful for citizens, domestic capital market and SOCAR. We want to involve local and foreign investors in the selling process of these shares in the future.