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BELGRADE (Serbia), June 5 (SeeNews) - The CEO of the Belgrade Stock Exchange, Sinisa Krneta, says the best way for big private companies in Southeastern Europe (SEE) to avoid debt crises is to attract capital from the stock markets.
Efforts are needed to ensure that the leading companies in SEE are adequately informed what to do to join the capital markets and avoid a debt crisis like the one that has gripped Croatian food-to retail concern Agrokor, Krneta told SeeNews in a recent interview on the sidelines of a financial conference in Sofia.
Last year, SEE media reported that Agrokor was planning an initial public offering (IPO) on the London Stock Exchange in the summer of 2017, with owner Ivica Todoric planning to sell up to 49% of the company's successful food unit to private investors.
However, the project failed after the company announced in January that its creditors were unwilling to refinance its debt under reasonable terms.
"Agrokor is one of the regional leaders in the countries of the former Yugoslavia, a company that is capable of influencing the macroeconomic data of Croatia. However, the management of the company allowed the debt-to-capital ratio to reach 85%," Krneta said.
The Agrokor crisis shows that owners of big private companies in SEE should look at the stock exchanges for fresh capital to finance the growth of their businesses, instead of taking out more loans, he added.
IPOs TO BOOST TURNOVER GROWTH
In the opinion of Krneta, the quantity and quality of the IPOs to be carried out in the coming years will determine the future development of the SEE stock exchanges, as the positive effects of the post-privatisation process have already played their role.
Therefore, IPOs will be the key to the growth of turnover on the Belgrade Stock Exchange in 2017, to be helped by Serbia's macroeconomic improvement in the last two years, Krneta said.
Last month, MK Fintel Wind, a joint venture of Serbian vertically integrated MK Group and Italy's Fintel Energia Group, said it planned an IPO on the Belgrade Stock Exchange, the first one since 1940, by offering between 20% and 40% of its capital. The company aims to raise 60 million euro ($67.6 million) from institutional and private investors that will be put into the construction of a 117 MW wind farm in Kosava, northern Serbia, and other smaller projects.
Krneta expects the IPO of MK Fintel Wind to prompt other listings on the Belgrade bourse. "If MK Fintel Wind succeeds in its efforts with the IPO, I believe big doors are opening for Serbia," he told SeeNews.
Both share indices of the Belgrade Stock Exchange posted double-digit gains last year, with the blue-chip BELEX15 increasing 11.38%. The broader BELEXline, a free‐float market capitalisation weighted index, closed 2016 13.69% higher.
Looking at peers of the Belgrade Stock Exchange in SEE, Krneta pointed to plans of Bulgarian company Expat Asset Management to list Exchange Traded Funds (ETFs) on the bourse in Sofia and foreign exchanges. Expat Asset Management said in March it was seeking regulatory approval to launch four ETFs, each of which will track the performance of one of the blue-chip indices of the Greek, Romanian, Czech and Polish stock exchanges.
Last year, the company launched the first exchange-traded fund (ETF) in Bulgaria, Expat Bulgaria, which has already started trading on the bourse in Sofia. The ETF tracks the benchmark index of the Bulgarian Stock Exchange, the SOFIX, by adhering to the method of full physical replication of the index.
"We see that our closest neighbours show we can do it," Krneta said.
In December, the Belgrade Stock Exchange became the fourth active member of southeast European securities trading platform SEE Link. The Bulgarian, Macedonian and Croatian stock exchanges set up SEE Link as a joint company based in Skopje in May 2014. The three founding bourses, which hold equal interest in SEE Link, contributed 80,000 euro each in capital. The European Bank for Reconstruction and Development (EBRD) supported the initial phase of the project with a 540,000 euro grant. The Ljubljana Stock Exchange joined the platform in December.
($ = 0.894335 euro)