Page 34 - GEORptMay18

8.5 Fixed income
8.5.1 Fixed income - bond news
Georgia Capital issues $300mn inaugural Eurobond prior to demerger from Bank of Georgia
Georgia Capital, the investment arm of Bank of Georgia Holdings (BGEO), issued a $300mn debut Eurobond on March 6, according to Sberbank. The six-year note saw moderate demand - the book was slightly above $500mn, and the yield to maturity at the close of the day was 6.375%, slightly below the 6.5- 6.75% guidance range suggested at the beginning of trading.
BGEO is looking to demerge i ts investment arm, which comprises utility and energy (GGU), real estate (m2), insurance (Aldagi), beverages (Teliani), and its banking arm, which is the core of its business and consists of Georgia's second largest lender, Bank of Georgia. The decision to demerge, announced in July 2017, aims to improve the group's growth prospects, flexibility, capital structure and investor clarity, according to its management.
BGEO currently has two listed entities on the London Stock Exchange: the banking arm and Georgia Healthcare, a large hospital, pharmaceutical and medical insurance chain that will be incorporated into its investment business. The banking arm of the business, which accounts for 80% of turnover at the moment, will continue with its present strategy of deepening its retail banking arm, deconcentrating the risk profile of its corporate loan book, increasing corporate lending and improving cost efficiency. This part of the business accounts for over 80% of turnover at the moment.
However, the investment arm of the business will "use its superior access to capital [...] to take advantage of the significant opportunities in the fast-developing Georgian corporate sector", according to a company press release. BGEO Investments would seek to grow businesses and then divest in a 5 to 10-year timeframe. The plan is for Georgia Capital to take a 19.9% share in the bank after the demerger, which it can monetise in the future.
The proceeds from the bond sale will be used to lend to its subsidiaries ($165mn) and to repay a loan to BGEO Group ($105mn); Georgia Capital will use the remaining $30mn for discretionary spending. In 2017, Georgia Capital reported $70mn in revenues and $40mn in earnings before tax.
34 GEORGIA Country Report May 2018 www.intellinews.com