Exchange-traded bonds for medium-sized businesses - secrets and features.
It's no secret that in recent years there has been a growing interest among private individuals in investing, the number of open investment accounts is growing, and the government is supporting businesses in their desire to issue bonds. At a time when bank deposit rates are tending toward zero, the Moscow Exchange Index is breaking records.
Against this background, companies are increasingly thinking about attracting alternative financing and issuing bonds. The interest rate on bonds is usually higher, but instead you can forget about the pledge of property and personal guarantees of business owners.
There is a general list of requirements for potential bond issuers:
The minimum amount of business revenue - 120 million rubles;
The minimum size of issue - 50 million rubles;
Net debt / EBIT (operating profit) is less than 3x or the volume of issue not more than ½ of the volume of revenue or balance currency;
IFRS reporting is desirable;
Average revenue growth rate (CAGR) of at least 10% over the last 3 years.
As you can see, bonds are not always about big business. The government also motivates medium-sized businesses to resort to this method of financing. In particular, there are subsidies for SMEs (small and medium-sized enterprises):
subsidizing coupon income - 70% of the coupon rate, but not higher than 2/3 of the key rate of the Bank of Russia;
subsidizing of bond issue costs - not more than 1.5 million rubles.
However, there are also special requirements to the legal structure of the business. The stock exchange and investors will not accept a "bank form report". What to pay attention to if you want to try to force the business in the field of issuing bonds:
There must be a clear legal basis for combining several legal entities whose indicators are taken into account for issuing bonds.For example, the business operates under several LLCs whose combined external revenues of 10 billion rubles. To declare the volume of the issue of 5 billion. (1/2 of the proceeds), you need to consolidate the proceeds on the statements. If the companies are registered in the name of distant relatives or "good guys" this will not be possible.The same requirement applies to business assets - if we want to demonstrate property stability, the ownership of property must be clear.Combining all companies into one is impractical and unnecessary, and sometimes impossible by legal requirements, so it is often about increasing the transparency of ownership structure.
The period of existence of the business is not less than 3 years. There is no unambiguous answer to the question whether the term of existence of the business (one of the legal entities of the group of companies) or the term of registration of the issuer itself is taken into consideration. There are cases when a separate company is established to issue bonds and this company combines on understandable grounds the indicators of the whole group of companies. But the requirements of the Stock Exchange and the Central Bank are constantly changing. Therefore, the final answer at a particular point in time will be given by the Organizer of the issue. (The company that fully supports the issue of bonds: advises the issuer on the terms of attracting funds, represents its interests in a dialogue with the Exchange, communicates with investors, etc.).
Openness of business and its manager. Bond issuance involves not only formal reports, but also regular "communication" of the business with investors, disclosure of plans and prospects, explanation of risks and timing difficulties.
The rights to intellectual property and significant assets must be secured and formalized on a clear basis. For example, a potential investor is unlikely to like a company that operates under a trademark registered in the name of a sole proprietor. Obviously, this carries the risk of stopping the company's operations and/or distorting its financial performance. Investing in such a company will be risky.
Official profitability of business. Potential investors must be able to see the actual profit of the company, not a table in Exel.
Taxes. In the above circumstances they will, according to the laws of physics, tend to the recommended values of the Federal Tax Service, which are regularly updated in the "Transparent Business" service.
So simple and so complicated at the same time.
Adding to that another point is the ability to quickly and cost-effectively come from the current model to that succinct option when the decision to issue bonds is made.
Developing an optimal Road Map as part of business structuring, which will take into account all the nuances and constraints of operations, also takes time. Therefore, as trite as it may sound, it is necessary to prepare for a bond issue in advance.