ING Groep NV sold $15 million of credit-linked structured notes tied to a unit of State Oil Co. of Azerbaijan, the first securities to reference the company since at least 1999.
The 10-month notes are linked to the Georgian unit of Socar, as the company is also known, and pay 2.8 percentage points more than the six-month London interbank offered rate, according to data compiled by Bloomberg. The Baku, Azerbaijan-based company produces, explores and refines petrochemicals, oil and natural gas.
“We buy emerging markets loan inventory that we can sell on to investors in many different forms, including credit-linked notes and credit derivatives,” said Guy Thomas, global head of emerging markets trading at ING in London.
Banks can create credit-linked notes by packaging up loans on their balance sheets to sell. The notes have tailored maturities and can offer higher yields than in the bond market because buyers of the securities suffer losses if there’s a default either by the bank issuing the note or the linked entity.
Socar’s two outstanding bonds mature in February 2017 and March 2023, Bloomberg data show. Credit-default swaps linked to the company are not actively traded and are not among the top 1,000 entities captured by the Depository Trust & Clearing Corp., which runs a central registry for the privately negotiated market.
ING’s structured notes are the first linked to an Azeri company since VTB Capital Plc, a unit of Russia’s second-largest bank, sold $17.6 million of one-year credit-linked notes on June 10 tied to the debt of International Bank of the Republic of Azerbaijan, Bloomberg data show.