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13.03.2007
The market of housing bonds grew 400% in 2006, with the issuers remaining weak
Growth of housing bonds` issuances on construction funding market in 2006 amounted to 400%. Growth in attraction of funds has been caused by increase in population`s gains and attractiveness of residential construction as an investment object. Today the share of speculative operations on real estate market fluctuates from 30% to 50% depending on region.
Popularity of use of housing bonds is caused by the fact that conclusion of investment agreement was banned in 2006, and by tax benefits.
Use of housing bonds over the past two years is characterized by high concentration of issuers in certain regions and cities of Ukraine. Kiev, Odessa and Crimea take 80% of overall volume of housing bonds. By using such a leverage Ukrainian construction companies are planning to set in operation ca 3.5m sq.m. in 5 next years.
According to the head of agency`s analytic department Andrey Kulik "use of bonds for construction funding in Ukraine is performed non-uniformly. The leader is the central region including Kiev. This region`s share is 69% of all issues. The second is the southern region with 25%. Eastern and western regions of Ukraine see insufficient use of such leverages with 6%.
The "Credit-Rating" agency thinks that such leverage does not envisage effective procedures for protection of investors` rights, with the issuers` creditworthiness remaining unreliable. As the agency said earlier, 94% of housing bonds` issues rated in 2005-2006 has speculative-grade ratings, which exhibits higher probability that issuers will not meet their commitments. First redemption of housing bonds scheduled for 2007-2008 may lead to defaults of a number of issuers.
The agency has rated 262 bond issues for construction funding for the amount of UAH 15.5bn. The share of housing bonds amounted to 77.5% for UAH 12bn. Other UAH 3.5bn were attracted by coupon or discount bonds. Currently 242 of 262 ratings are of speculative grade, 19 of investment grade, and 1 rating assigned to coupon bonds issued by "Agrobudpererobka Ltd" for UAH 50m has been since 6 March 2007 on Rating Watch list with Negative Outlook.
Information on all the credit ratings assigned in accordance with the Ukrainian national scale may be found in the REUTERS and BLOOMBERG information systems.
For further information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
