Bank Forum Increasing Share of Cheap Foreign Financing

Bank Forum (FORM: BUY) is going to sign an agreement on a USD 90 mln syndicated loan at LIBOR+1.65% next week, according to Ukrainian News. The lead organizers are Fortis, Bayern LB and Commerzbank. The bank attracted a previous syndicated loan in March 2006 for USD 60 mln. Forum’s President, Yaroslav Kolesnik, also said yesterday that the bank was considering issuing Eurobonds in 2008. The issue is likely to be larger than its previous USD 100 mln three-year Eurobond issue in 2006. Alexander Viktorov: On the heels of the acquisition, Bank Forum is looking into options for cheaper and larger foreign borrowing. The price of the bank’s syndicated loan is less than the previous rate of LIBOR+3.65% on its 2006 facility (in February 2006 that loan was extended at LIBOR+2.15%). We positively estimate the increasing share of cheaper foreign borrowing will have a positive effect on the bank’s growth and margins. So far, we leave our financial forecasts unchanged and reiterate our target and BUY recommendation.