Foreign owners of city of Odesa municipal bonds have stopped preparing their lawsuit against the mayoralty and have begun negotiating bond redemption, reported Ukrainski novyny several days ago. This involves representatives of the largest investors like Global Fund Management (Moscow) and Parex (Riga).
After a four month delay the Odesa City Council began redemption of its bonds for a 90 million loan, allocated mostly among non-resident corporate investors, said Odesa mayor Ruslan Bodelan. Further, he noted that beginning from September 30 natural persons and Odesa residents will be given an opportunity to turn in their bonds for a total of Hr 1.5 million through the Porto-Franko Bank. In October, the bank will redeem bonds with nominal values of Hr 10 and 20 for a total of Hr 0.8 millions, and in November and December, Hr 50, 100, and 1000 bonds in order to pay off the back debt to natural persons who are Ukrainian citizens by the end of this year.
Ruslan Bodelan said the managers of 15 local enterprises out of 100, holding bonds for a total of Hr 300,000 stated they would return the bonds to the issuer — the Financial Department of the City Council — without requiring payment. However, the council will have to negotiate bond redemption with the enterprises whose employees received those bonds in lieu of wages.
As far as the settlements with non-resident corporate purchasers are concerned, despite the financial crisis the redemption of the previously purchased securities will be, paradoxically as it may seem, accelerated, said Mr. Bodelan. This is due to the fact that the financial entities holding the bonds have indicated their willingness to grant substantial discounts to the issuer when paying back the bonds. The point now is not the expected 50% profitability, but only the recovery of the nominal value of the money invested.
The City Council will be able to begin paying its almost 88 million debt to foreign banks, financial entities, and natural persons only next year. It will take one or two years to redeem all the bonds, unless the government and the National Bank render support, said the mayor.
