Nine companies in Serbia are ready to issue corporate bonds, with 15 more in preparation, according to Assistant Minister of Finance Ognjen Popović. These bonds are seen as a promising investment opportunity, providing higher returns than traditional bank savings and a safer alternative to real estate investments.
Corporate bonds, a common capital market instrument, allow companies to raise funds without the immediate burden of loan repayments. Instead of monthly loan repayments with interest, companies only pay interest (or “coupons”) on the bonds over the term of the bond, typically five years. At the end of the period, the principal investment is returned to bondholders. This structure offers companies a valuable tool to free up cash flow for growth, such as investing in new products or facilities, without the immediate financial strain of regular loan repayments.
“Corporate bonds are essentially securities that indicate how much each bond is worth,” explains Popović. For example, if an investor buys 100 bonds with a 5% coupon, they would receive periodic interest payments over the bond’s term, with the principal returned at the end of the period.
Popović also highlights that corporate bonds are especially useful for long-term investments that need time to generate profit. This aligns with Serbia’s vision for revitalizing the capital markets and reintroducing companies to this financing method, starting with the newly restructured Belgrade Stock Exchange.
Unlike loans that come with ongoing costs, including monthly repayments, corporate bonds allow companies to use the raised capital freely for extended periods. This makes bonds an ideal tool for funding projects, acquiring machinery, and other investments that require time to produce returns.
The Ministry of Finance has been actively supporting companies in navigating the process, offering both financial and legal assistance. In addition, companies seeking to issue bonds are given credit ratings, a step beyond the legal requirements, to help attract potential investors.
Out of the 24 companies currently involved, nine are already prepared to issue corporate bonds, while 15 others are working towards it. Recently, the Securities and Exchange Commission approved the issuance of corporate bonds by Elixir, a company in Serbia known for its strong environmental practices, including a focus on circular economy innovations and low carbon emissions.
Popović emphasizes that Serbia’s corporate bond market is poised to expand, presenting significant opportunities for both companies and investors.
