NBS confirms purchasing of part of Telekom's bonds; Economists: State aid

NEWS 30.09.2020 20:29
Source: N1

Non-transparency characterises another process in Serbia - the National Bank of Serbia (NBS) bought state company Telekom Srbija's corporate bonds, and the Belgrade Danas daily has reported that four commercial banks have bought the securities which the NBS immediately repurchased.

Although the central bank told N1 that everything was in line with market rules, economists said the transaction could be classified as state aid to Telekom Srbija.

Telekom has tripled its debts in the last two years and had a 1.15 billion Euro deficit, which led the largest state telecommunications company to issue corporate bonds worth about 200 million euros.

The banks bought the debt securities. Five of them then sold part of the bonds to the NBS soon after purchasing them. The NBS confirmed the transaction to N1, but the public did not know at what price the central bank bought the bonds.

„The National Bank of Serbia made a decision in May that allows them to make such a transaction, but the question is whether such a decision is economically justified … In this way, the National Bank can include in its balance sheets bonds that are not worth that much or after some time to turn out not to be worth that much … That would make a loss in the balance sheet of the National Bank,“ Milos Obradovic, a Danas daily econ journalist and the author of the mentioned report, said. 

Besides the price, the NBS also doesn’t say how many debt securities it bought. It says it isn’t about a half of the issued, as reported in the media, but „closer to a third“.

„The National Bank of Serbia did not buy the maximum allowed amount of Telekom’s corporate bonds, which is limited by two criteria – 70 percent of the entire issue or 11 billion Dinars (some 93.5 million Euro) of market exposure to one issuer. That indicates there was sufficient demand from banks as investors for these bonds,“ the NBS said in its response to N1.

Economic analysts have no dilemma, they say: it is de facto state aid.

However, FEFA professor Goran Radosavljevic says that such state aid is not illegal right, because the European Union „reduced“ the control of state aid during the crisis caused by the coronavirus. 

He told N1 the NBS did not, as he put it, accidentally „squeezed through“ this transaction into a measure against the COVID-19 crisis.

„It was known in advance that some banks would buy it, it was probably prepared in advance for the NBS to buy 50 percent as much as it could and the story is closed … Telecom got state money indirectly. Some other state-run companies such as Jugoimport SDPR (state arms dealer) will probably also receive that kind of aid,“ Radosvljevic said.

„That’s the channel of the state aid activated under the umbrella of fighting COVID-19 pandemic,“ he added.

A similar practice – a central bank buying state-owned companies’ securities exists in neighbouring Hungary, with a small difference compared to Serbia – the process there is entirely transparent.

Brokers estimate that it is not clear how much Telecom bonds worth

„I think it would be much better if Telekom publically issued the bonds so that anyone could buy them on the financial market, that those bonds were listed on the Belgrade Stock Exchange and that the price was set there. In that case, the market would give its word about the success of Telekom’s business,“ Branislav Jorgic, a broker told N1.

It has been known for a while the bonds were issued to, as Telekom Srbija said, finance business activities and refinance debts, which increased due to the purchase of cable operators at prices higher than the market ones, according to experts. 

Telekom hasn’t said a word about its bonds’ whole story.