An increasing number of municipalities have chosen to finance their development projects by bond issues, especially considering the costs lower than those related to a bank loan. Moreover, bonds became interesting for investors too, as prices of shares plunged.
The estimates by market analysts indicate an average drop of 10-20 percent in the own revenues of municipalities in 2009, after they have increased by an annual 18-20 percent in 2008.
“I consider 30 percent of own revenues to be a huge indebtedness, because, in the current situation, revenues of municipalities fell abruptly, and those which borrowed €100 million at a RON 3.3/€1 exchange rate, they have to pay back the money at a RON 4.3/€1 exchange rate, probably, which means a huge effort,” said Ioan Cuzman, Chairman of the SIF Banat-Crisana financial investment company.
The VMB Partners consultancy company is preparing eight municipal bond issues, worth some RON 400 mln (some €93.5 mln) all having variable interest and maturity ranging from 17.5 to 20 years.
