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“There will be only one wave of propositions on the VAT-bonds market attractive for investors” - Commented the director international capital markets of ALTERA FINANCE Investment Group Maxim Shinkarenko

Jun 24, 2010

Purchasing VAT-bonds with a discount is attractive for investors because of its profitability. Nowadays domestic, as well as foreign banks and assets are potential clients for purchasing of these stocks.

However, the interest of foreign investors in purchasing VAT-bonds is limited. As a rule, investment to Ukraine is attractive only when the profitability is no less than 20% annually. It is connected, first of all, with higher risks. For example, profitability of Eurobonds is up to 13-15% annually; at the same time these stocks are a reliable tool for an investor, which does not involve any currency risk.

VAT-bonds with discount redemption are a good profit opportunity for Ukrainian banks. There is a strong possibility that domestic investors will be able to absorb about 80% of the bonds. Non-residents will be able to purchase the remaining 20%.

We suggest two possible scenarios:

1)     There will be practically no alive, free market. This is proven by the data collected by the State Tax Administration of Ukraine, according to which as of June 17 there were 809 applications for compensation by VAT-bonds 5.2 bln UAH for outstanding value-added tax. At the same time the total amount of the VAT-bonds issued, is 19.5 billion UAH. Major companies, which share the most part of the defaulted budget arrears for compensation of value-added tax, will skip the market. They will be aimed at reckoning the bonds at their nominal value, for example, by means of offsetting or some other administrative means.

2)     The market will be limited. Many companies, which have arrears for value added tax refund by the state, State Tax Administration of Ukraine does not confirm VAT, which limits the number of potential bonds greatly. At the same time, the discount for these securities purchase declared by the companies will be below market level.

It is believed that on the VAT-bonds market there will be only one wave of offers, attractive for investors. The second and the following could hardly interest anyone. Those who will quickly adjust to the market must win.

VAT-bonds are an interesting object of investment for ALTERA FINANCE Investment Group, which is why our company entered the market with an offer of purchasing these securities.