Bonds as tool for urban development

The possibility of issuing municipal bonds by city councils was discussed at DESPRO conference. They are easy to issue, they are cheap compared to credit money, and have a number of advantages.

By Dmytro Synyak http://decentralization.gov.ua/uploads/ckeditor/pictures/1104/content_1.jpg

"According to Cbonds information agency, there are municipal bonds of 43 countries in the total amount of USD 2 trillion in circulation in the world. Moreover, in most countries, municipal bonds can be issued not only by cities, but also territories: provinces, departments, regions, etc. Municipal bonds are issued either locally or as eurobonds denominated in foreign currency for placement on international financial markets. China, the European Union, South Korea and Canada are the leaders of issues. The average issue volume is USD 300 million. Bonds are usually issued for 3, 5 and 7 years.”

That was the first message Serhiy Moskvin, president of the Public Association “Ukrainian Union of Capital Markets”, began his speech at the seminar “Tools of local investment projects financing”, held in the capital. In addition to this association, the organisers of the seminar included the Swiss-Ukrainian project "Decentralisation Support in Ukraine" (DESPRO) and the Ukrainian Stock Market Development Institute of the KNEU named after Vadym Hetman.

“In Ukraine, municipal bonds were several times successfully issued and placed,” said Serhiy Moskvin. “It was done by Kyiv, Vinnytsia, Ivano-Frankivsk, Lviv, Lutsk, Donetsk, Luhansk and other cities. And from 2003 to 2017, in total, there were 68 such issues worth more than USD 11 billion.

Serhiy Moskvin also described in detail the procedure for the issue of bonds of local loans. Therefore, the algorithm should be as follows:

1. City council’s approval of the draft decision on the amount and terms of borrowing by issuing bonds

2. Receipt of approval of the volume and terms of borrowing from the Ministry of Finance

3. Adoption of decision on the issue of bonds by the executive body of the city council

4. Signing of an agreement with the underwriter, if necessary

5. Submission of the documents for registration of bonds’ issue to the National Commission on Securities and Stock Market

6. Registration of bonds’ issue

7. Conclusion of a contract on servicing securities’ issues with the NBU

8. Assigning of ISIN code

9. Placement of bonds

10. Approval of bonds’ issue results

11. Submission of the documents for registration of the report on the results of bonds’ issue to the the National Commission on Securities and Stock Market

12. Registration of the report on the results of bonds’ issue and issuance of the certificate on registration of bonds’ issue

At the same time, the main expenses of the bonds’ issuer hardly exceed UAH 10 thousand, which go to the assignment of the ISIN code (international identification number of securities), servicing of bonds’ issue, information and technical support services, etc.

The full version is available in Ukrainian – please click HERE

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V.Kozak DESPRO

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