Buying bonds is one of the ways to invest free money and generate returns. Bonds are securities that the issuer (government, company or bank) issues to raise funds for development. The investor purchases bonds and receives interest on them in the form of free cash or accumulated returns.
Investing in bonds in Belarus can be a profitable way to preserve and increase capital, but it requires market analysis, choosing the right bonds and risk management. Therefore, it is recommended to consult professional financial advisors before investing.
General information about the bond market in Belarus
The value of bonds that can be bought in Belarus is expressed in Belarusian rubles. The value of government bonds and bonds of the National Bank of Belarus may be expressed in another currency.
Bonds can be bought:
- On the stock exchange. These are exchange-traded bonds.
- In open sale: from issuers (these are companies that issue bonds) or from owners who have decided to sell their bonds. These are over-the-counter bonds.
Transactions with bonds that are not made on the stock exchange are registered by a broker or a depository. This does not apply to government bond transactions. Transactions with exchange-traded bonds are registered by the stock exchange.
Bondholders can pledge them.
Who issues bonds in Belarus
The bond market in Belarus is represented by bonds of banks, trading and manufacturing companies, and government bonds.
Government bonds act as a tool for financing government debt. In Belarus, government bonds are issued by the Ministry of Finance of the Republic of Belarus. They can be either nominal or indexed by the exchange rate of a foreign currency, secured by state property or other guarantees.
Corporate bonds are issued by private and public companies to attract investments. Companies actively involved in various sectors of the economy issue corporate bonds to finance various projects and business development.
These are the main types of bonds available on the Belarusian market. Each type of bond has its own characteristics and risks, therefore, when investing in them, it is important to conduct a thorough analysis and consult with financial specialists.
Basic concepts in the bond market that an investor needs to know
- The company that issues the bonds is the issuer. It is the issuer that bears obligations to the bondholders. The issuer can be a resident and a non-resident.
- Bonds can be bearer and registered — for a specific owner.
- Bonds can be documentary — on paper forms or undocumented — in the form of an entry in the “depot” account, which is opened to the investor in the depository.
- The depository is a Belarusian company that has a license for professional and exchange—traded securities activities. In Belarus, depositories include the central securities depository and depositories of banks and other companies.
- An investor who has a deposit account opened in a depository is called a “depositor”.
- Information about investors is included in the register of securities owners. This is a document that forms the state securities authority.
- It is important for an investor to understand what he will receive as a result of investing in bonds. The investor’s income is a discount on the bond: This is the difference between the price at which the bond was purchased and the value of the bond that the investor will receive when the bond is repaid. The investor’s income may also be interest on a bond or another type of income.
- The bond issue prospectus is the main document that a potential investor needs to study. This document is registered by the state securities authority.
The prospectus includes, in particular, sections:
- With information about the bond issuer.
- Information about the owners of the property of the bond issuer, including their personal data.
- Information on the issuer’s transactions for the last reporting year.
- Information about the representative of the bondholders.
- The procedure and terms of repayment of bonds and payment of income.
9. Redemption of bonds is the payment by the issuer of the value of bonds, income provided for by the terms of the bond issue or the preservation of bonds in bonds of another issue or the fulfillment of the issuer’s obligations in another way, which is prescribed in the prospectus of the bond issue. When the bonds are redeemed, their circulation stops: after the bonds are redeemed, no transactions are made with them.
Who is the representative of the bondholders
A representative of the bondholders is a person who acts on behalf of the bondholders. This person is appointed by the bond issuer and enters into an agreement with him. In some cases, a representative is chosen at a general meeting of bondholders.
You can find out who represents the bondholders from the bond issue prospectus. Usually this is a company that is a professional participant in the securities market: a broker, a depository, a trustee. This company may represent the interests of bondholders of several issuers.
The issuer itself cannot represent the interests of the bondholders.
A representative does not need a power of attorney to represent the interests of bondholders. The role of the power of attorney is played by the bond issue prospectus and the contract concluded with the bond issuer. The issuer pays for the services of a representative of the bondholders.
A representative of the bondholders represents the interests of the bondholders:
- In front of the issuer.
- To the person who provided security for the obligations of the issuer of the secured bonds.
- To other persons, including government agencies.
A representative of the bondholders makes claims on behalf of the bondholders to the issuer, the person who provided security for the issuer’s obligations.
What should an investor pay attention to in the issue prospectus
- Before making a decision on investing, you need to find the “Brief Summary” section in the bond issue prospectus. This section is designed specifically for all categories of investors so that they can easily navigate information about the issuer, including its strategy and goals.
- Special attention should be paid to information about companies in which the issuer has a stake. Such companies should not include those that are in the process of bankruptcy proceedings or are threatened with bankruptcy. Such signs are difficult to notice on your own, so we recommend using the services of our financial advisor.
- The issue prospectus may indicate the credit rating of the bond issuer and the credit rating of the bonds. When such information is available in the prospectus, our financial advisor will provide expert advice on the meaning of this data.
- It is necessary to pay attention to the information on whether there are enforcement proceedings and debts under enforcement documents in relation to the bond issuer. The presence of enforcement proceedings and debt will not be an unambiguous disadvantage for investing in bonds of such a company.
- The procedure for paying income on bonds. The issue prospectus may provide for the payment of interest income, a discount, and the payment of the nominal value of bonds upon their repayment, taking into account indexation or without. It is also necessary to pay attention to the procedure for repayment of bonds, including early repayment.
- The section on the issuer’s accounting and financial statements, the auditor’s report and the calculation of the value of net assets. Our financial advisors will analyze this information for you.
- The issue of bonds by the issuer is secured or not secured. Ensuring the fulfillment of the issuer’s obligations under the bonds may be secured by collateral for assets in other ways. Secured bonds seem to be a more reliable investment tool. After all, if the issuer is unable for any reason to repay the bonds at its own expense, they can be repaid at the expense of collateral.
- Does the prospectus of issue limit for non-residents to buy bonds.
To make an investment decision, you need to evaluate all the information in the issue prospectus in a complex. Our financial advisors will study the prospectus and provide clear information in an accessible form for making an investment decision.
How we can be helpful when considering investing in bonds
Our lawyers and accountants are experienced specialists in the field of securities. We can:
- Advise you on the issues of companies that offer their bonds for sale.
- Analyze the bond issue prospectus and determine the investment prospects.
- Represent your interests when buying bonds.
Contact us
If you have any questions related to investing in bonds in Belarus, we will be happy to help you! Our many years of experience in the securities market will help you make the right decisions and resolve any situations.
Phone and e-mail communication options are available for your convenience:
- +375293664477 (WhatsApp/Telegram/Viber);
- info@ambylegal.by.
