Issuing corporate bonds in 2021 and servicing obligations during the war in Ukraine
In the world of finance, MyCredit showed that it can do well even when times are hard. They used bonds to grow before the war, and during the war, they kept their promises and expanded their business. Here's how they did it.
Important note: MyCredit is a partner of Space Crew Finance group, which was founded in 2016, and now it employs over 500 individuals in 5 countries, encompassing various departments such as IT, risk management, finance, automation, and customer support. The group's operations are strategically organized, with a central headquarters driving core competencies, while field teams handle operational challenges.
Short Intro: Understanding the Bond's Meaning and Objectives
Bonds are essentially borrowing made by investors to a bond issuer, typically a corporation or a government. The bond issuer commits to pay it back on a predetermined date, together with interest. Bonds are a tool for organizations to raise capital for growth and to fund their operations.
For a financial company, bonds are crucial for several reasons:
Raising Capital: Bonds are a vital tool for raising capital. When a financial company issues a bond, it's essentially borrowing money from the investor who purchases it. This capital can be used to expand operations, fund new projects, or invest in research and development.
Liability Management: Bonds have fixed interest payments, which can help companies manage their cash flow and liabilities effectively. The known expenses associated with bonds allow for more accurate financial planning.
Investor Relations: Bonds can also enhance a company's reputation with investors. By meeting its obligations and paying back its bonds on time, a company can demonstrate its financial stability and integrity.
Flexibility: Unlike equity financing, where a company sells a portion of its ownership, bonds allow companies to raise funds without diluting the ownership stake of existing shareholders. This allows companies to maintain control while still accessing the capital they need.
Therefore, bonds allow financial companies to fund growth and manage their operations effectively.
MyCredit’s Bonds issue
In 2021, MyCredit developed an ambitious growth strategy that required significant funding to be achieved. The issue of bonds was chosen as a funding instrument. The National Securities and Stock Market Commission of Ukraine confirmed this strategy and the plan was promptly launched.
The bonds were issued in both the local currency, Ukrainian hryvnia (UAH), and US dollars. The investors' response was enthusiastic, and the bonds were placed within six months. The total amount was 190M UAH (equivalent to $5.1M at 2023 exchange rates) and $2M.
MyCredit issued five series of bonds:
Three series in hryvnia (A, D, E) totaling UAH 190 million
Two currency series (B, C) totaling $2 million
Interest rates in hryvnia ranged from 13% to 27%, and in foreign currency, they were between 5% and 7.5%.
Purchasing Process: Both legal entities and individual investors with securities accounts could purchase these bonds. Prospective buyers needed to open an account with the Central Bank by contacting a broker. To find and purchase a bond, it could be located in the register of traded securities on the Ukrainian PFTS exchange.
Sold Out: The entire issuance was sold out within six months from the date of issue, reflecting strong investor confidence. However, it should be noted that bonds issued in Ukraine can only be traded in Ukraine and are not available on European stock markets, so they were not available to European investors
Liability management during the war
However, the situation drastically shifted in February 2022 when Russia initiated a full-scale war against Ukraine. As a result, the Ukrainian government suspended all bond activities. But MyCredit remained resolute. They sought permission from the government to honor their commitments to investors by buying back the bonds. In addition, they proposed an increased interest rate for investors to compensate for the altered market conditions.
Thanks to their proactive stance, MyCredit was able to reduce their debt by an impressive UAH 120 million within just five months of the war. They also resumed lending operations on a smaller scale, with results exceeding pre-war levels.
Reflecting on this experience, MyCredit sees their venture into bonds as a resounding success. Bonds were a reliable vehicle for driving company growth.
MyCredit: №1 Short term Lending Company in Ukraine
During the war, MyCredit reduced the liabilities from UAH 150 million and $2 million to UAH 80 million and $1 million. Their effective financial management and unwavering commitment to promises were proven. As of 2022, the company stands as the No.1 lending company in the Ukrainian market.
MyCredit's successful journey with bonds is more than a business story; it's a narrative of dedication, innovation, and triumph over adversity. Under the umbrella of SpaceCrew Financial Group, MyCredit’s achievements in wartime speak to a company with limitless potential.
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