Gdynia places largest municipal bond issue
The five-year, unsecured general obligation bond is being privately placed by Bank Pekao. The money raised will be used by Gdynia for two projects, said Radoslaw Hoc, head of the credit trading division of Bank Pekao. One project is for the building and renovating of the city's roads. Spending for this investment will take place from 1998 to 2002. Money raised by the bond will also be used to construct a new central bus station for the city-owned mass transportation corporation. This project is planned to start in 1999 and be finished by 2000.
The bond's first tranche of zl. 17.6 million ($5 million) is to be issued by the end of 1998, Hoc said. In subsequent years, the bond's tranches will be: 1999, zl. 51.8 million ($14.8 million); 2000, zl. 68.8 million ($19.7 million); 2001, zl. 42.3 million ($12.1 million); 2002, zl. 25.8 million ($7.4 million).
The bonds will have a face value of zl. 100,000 and maturities of three to eight years. Interest will be based on the yield for 52-week treasury bills (T-bills), with three-year bonds yielding a 0.35% premium and eight-year bonds a 1.2% premium.
This is Gdynia's second bond issued. The first was issued in 1996 for zl. 28 million ($8 million) to pay for new buses. Gdynia has not received a rating from any major rating agencies. Gdynia's new bond will account for about one-fourth to one-fifth of all outstanding bond issues by Polish gminas, which to date totals approximately zl. 900 million ($260 million), according to Pawel Radzikowski, research analyst at Citibank.
Previously the largest municipal offering had been Krakow's zl. 138 million ($40 million) issue launched earlier this year, also to pay for road upgrading. Krakow received a BBB+ stable local currency rating and BBB- positive foreign currency rating from Standard & Poor's. (See related story, page S6)
Citibank expects issuance of municipal debt to take-off because municipalities need to spend as $5 billion over the next 10 years for infrastructure, Radzikowski said. Also, city governments are gaining a better understanding of financial instruments, he added.
The bond's first tranche of zl. 17.6 million ($5 million) is to be issued by the end of 1998, Hoc said. In subsequent years, the bond's tranches will be: 1999, zl. 51.8 million ($14.8 million); 2000, zl. 68.8 million ($19.7 million); 2001, zl. 42.3 million ($12.1 million); 2002, zl. 25.8 million ($7.4 million).
The bonds will have a face value of zl. 100,000 and maturities of three to eight years. Interest will be based on the yield for 52-week treasury bills (T-bills), with three-year bonds yielding a 0.35% premium and eight-year bonds a 1.2% premium.
This is Gdynia's second bond issued. The first was issued in 1996 for zl. 28 million ($8 million) to pay for new buses. Gdynia has not received a rating from any major rating agencies. Gdynia's new bond will account for about one-fourth to one-fifth of all outstanding bond issues by Polish gminas, which to date totals approximately zl. 900 million ($260 million), according to Pawel Radzikowski, research analyst at Citibank.
Previously the largest municipal offering had been Krakow's zl. 138 million ($40 million) issue launched earlier this year, also to pay for road upgrading. Krakow received a BBB+ stable local currency rating and BBB- positive foreign currency rating from Standard & Poor's. (See related story, page S6)
Citibank expects issuance of municipal debt to take-off because municipalities need to spend as $5 billion over the next 10 years for infrastructure, Radzikowski said. Also, city governments are gaining a better understanding of financial instruments, he added.
