Jun 2010 Financial News

TTSE CEO: Bond market can finance projects

Jun 09, 2010

The corporate bond market presents many opportunities for investors, said Wainwright Iton, chief executive officer of the T&T Stock Exchange (TTSE). “The reality in any financial market is that corporate bonds go head to head with banking financing in our own environment. I think it presents a win win opportunity for both issuer and investor. “With the prime rate about 9.5 per cent at the moment and with deposit rates at two per cent or 1.75 per cent, it means that if you need capital to fund your development, the corporate bond market can offer you that capital at a substantial sub-prime and not everybody borrows at prime,” he said.

Iton said this last Friday at a press conference at the TTSE, Nicholas Towers, Independence Square, Port-of-Spain, where the TTSE launched the corporate bond market. The market opened on Friday with the listing of three Scotiabank T&T Ltd bonds, which are worth more than $1 billion. Iton added that the bond market can be used to finance various developments. “It offers both an opportunity to go to a potential user of capital and suggest that rather than borrow $200 million from Richard’s bank, let me structure this corporate bond for you. There’s the likihood that with Government borrowing at 6.5 per cent at the moment, you could bring that bond to market, let’s say at 7.5 per cent. Richard Young is the managing director of Scotiabank T&T Ltd.

Criteria for issuing bonds

“You would be at least 200 to 300 base points lower than banking lending rates and, as an investor, you are possibly 500 or 450 base points up on the return than you make if you are only making 2.5 per cent in your various deposits now. “This is the opportunity out there now for our membership in terms of the structuring of deals to finance various developments and for investors, once these deals are sufficiently well structured,” Iton said. He gave six criteria that the Securities Exchange Commission (SEC) has given for those wishing to issue bonds.

• The issuer is and has been a reporting issuer for more than 12 months immediately preceding the date of the trade.
• The trade must not be a trade by an underwriter acting as an underwriter in previously issued securities which were purchased from the issuer by such under writer less than six months prior to such a trade.
• That no unusual effort is made to prepare the market or to make a demand for securities that are the subject of the trade.
• No extraordinary commission or consideration is paid to a person in respect to trade.
• If the seller is a person connected to a reporting issuer, such a seller has no reasonable grounds to believe that such issuer is in default under the act or any of the by-laws.
• At least six months must have elapsed from the date of the initial distribution.

Insufficient listings

Iton said this leaves the TTSE optimistic about the future.
“We look forward to the rest of 2010 and beyond to 2011 and 2012 with a certain amount of optimism that we can see gross dynamism and viability in our new corporate bond market. Our equities market in 2010 have been performing reasonably well. “The volumes are not as robust as we would want it to be, but the markets have, to some extent, been stabilised. Our Composite Index is up about 8.77 per cent here today,” he said. “We want to continue with new listings because a market with 38 listings is not sufficient. We need to get that number doubled as quickly as possible.

The question is: how do we double it. As I’ve said before, we have been hitting our heads against the wall, trying to get the privately-owned companies to convert. “One of the things we can go through with fairly quickly and we will go to the new Government with this request. “We think that there are some opportunities for some viable State-enterprises to be divested through the market place. We aren’t saying that these public companies must be sold 100 per cent to the public, we are asking for about 25 or 30 per cent of the cheque applicable to be placed onto the market and they will have their place alongside Scotiabank, Republic Bank, etc,” he said.


Source:
Raphael John-Lall
Trinidad Guardian
Wednesday June 9, 2010

http://guardian.co.tt/business/business/2010/06/09/ttse-ceo-bond-market-can-finance-projects