Kazan Mayor’s Office placed the 4-year-old municipal loan at the rate of 8.75% per annum

(KZN.RU, December 20). The book for applications for purchase of municipal bonds of 2010 of Kazan was closed on December 17. "The week ended with an important event for us - the placement of the next bond issue in the Troika-Dialog Investment Company. For the first time we managed to place a loan for such a long period - 4 years, and at the rate of 8.75% per annum - this is a very good indicator",  Ilsur Metshin, the Mayor of Kazan commented today on the Business Monday.

The mayor noted that at the end of the year the situation on the financial market is rather challenging, and even large corporations can not attract loans at favorable interest rates. As an example the Mayor of Kazan brought the KAMAZ, one of the leading engineering companies in Russia; a loan which is available for a shorter period - 2 years, at a higher rate - 9 percent.

"Not only the ratings which consulting agencies assign to us but also at what rate they give us the money shows the state of our budget. This rate shows that we are absolutely healthy financially and able to attract large investments for the long term", the Mayor of Kazan said.

He also noted that many large financial companies would like to participate in organizing the loan but the work was carried out with Troika Dialog Investment Company.

Airat Garipov, the Head of Finance Department of the Executive Committee of the city commented that funds received as a result of placement of bonds are assumed to be refinanced of the debt in order to reduce the cost of loans servicing.

"We place bonds for refinancing so that to stretch the pay back as long as possible, and to make the interest rate as low as possible. We do not want to leave the public loan market because it is a credit history. If Kazan places loans on the market and clears it thus in business there is the same truly market relations", the Head of Financial Management said.

Airat Garipov recalled that municipal debt is 19.3 billion rubles in an absolute value, 14 billion of which are budget loans attracted for the construction of roads for the Universiade-2013, respectively the commercial debt of the city is 5.3 billion rubles.

"Currently 870 million rubles are laid for the debt servicing in the budget for the next year. So that the money comes into the city’s economy in 3 years it is necessary to reduce the debt. We first adopted deficit-free budget; we call it a stabilization budget. By the end of the normal three-year stabilization budget we expect that our commercial debt will be about 30 percent of our income", A. Garipov said.

Currently there are two-year bonds of Kazan of the 6-th issue for 2 billion rubles. Kazan placed 2 million bonds of the 6-th series on the MICEX Stock Exchange on December 10, 2009. The rate of all eight quarterly warrants set at 12% per annum. Bonds also have depreciation maturity structure: in a year and one and a half years it is prescribed to redemption 25% of the nominal value, the remaining 50% in two years. Organizers of the loan placement are the Bank of Kazan and the Troika Dialog Investment Company.