Page 38 - GEORptJul19

8.5 Fixed income
8.5.1 Fixed income - bond news
VTB sees Georgian telco Silknet’s bonds as “attractive” despite rally since March issue
Georgia’s largest lender TBC issues $300mn in unsecured bonds
Five-year bonds issued in March by Georgia’s second-largest telecommunications operator Silknet and traded under the SILNET 24 tag have performed strongly since the placement, gaining over 5pp in price, VTB investment bank said in a market update.
However, “we still consider the bond attractive” at its current 230bp Z-spread premium relative to GEOCAP 24 of Georgia Capital (oil services company, B2/B+/-), the bank added. SILNET 24 could be a good addition to a high yield-diversified investment portfolio, the analysts of the Russian bank commented. At the same time, the small size of the issue made it inappropriate for inclusion in major indices, and this would likely constrain the bond’s liquidity in the longer term, they added.
Silknet on March 27 announced that it had successfully raised $200mn from a 5-year, senior unsecured eurobond issue with a 11% coupon attached. On June 20, the bonds were traded at a yield of 9.7%.
Silknet (B1/-/B+) is one of the two leading telecom operators in Georgia (Ba2/BB-/BB), together with MagtiCom (non-rated). Silknet’s operating profile originally incorporated a fixed line business (where it remains a leader by customer numbers, with a 51% market share at YE18), as well as broadband services and paid-television segments (of which it is the second largest provider, holding 33% and 36% of the market, respectively, as of YE18).
In 2018, Silknet acquired Georgia’s second largest mobile operator, Geocell, thus gaining a 36% share of the country’s mobile market.
The mobile market in Georgia (voice and data services) already has high penetration (131% at YE18), and the number of subscribers has stabilised in recent years.
In the meantime, fixed broadband (penetration of 73%) and paid-television (58%) are showing subscriber growth rates viewed as healthy by VTB.
Georgia’s TBC Bank, the largest bank in the country on all key metrics, on June 12 announced that it has successfully priced a debut $300mn, 5-year senior unsecured bonds issue.
Heavily overbooked, the issue was launched with a 5.75% coupon at a 6% yield—which the bank said was the lowest ever yield achieved by a Georgian issuer on the international debt markets.
It is expected that the bonds will be listed on the regulated Euronext Dublin market on or about June 19 with a rating of Ba2 by Moody's and BB- by Fitch. An application may be made to list the bonds on Georgia’s stock exchange as well. If successful, the issue would become Georgia’s first dual-listed international offering of senior unsecured notes.
“The $300mn will be used for funding Georgian small and medium sized businesses and will contribute to the growth of the Georgian economy,” Vakhtang Butskhrikidze, general director of TBC Bank said, as quoted by
38 GEORGIA Country Report July 2019 www.intellinews.com