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The Warsaw Voice » Law » October 28, 2009
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Catalyst-The New Bond Market of the Warsaw Stock Exchange
October 28, 2009   
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Catalyst, a platform for trading in financial debt market instruments, was launched by the Warsaw Stock Exchange in cooperation with MTS-CeTO S.A. Sept. 30. Catalyst is the collective name for four markets: two regulated ones (retail and wholesale) and two alternative markets (retail and wholesale).


Catalyst is expected to become a specialist market for both corporate and municipal bonds. It is hoped that it will help promote forms of financing alternative to bank loans, such as bond issues, with entrepreneurs and local governments.

Local governments may issue bonds on the strength of the Public Finances Act and the Bonds Act. The additional virtue of this source of finance is that such bonds may take a broad variety of forms. By way of example, revenue bonds could be particularly attractive to municipalities, because the benefits of the issuer (stemming from the bond) are not taken into account when setting some restrictions on debt levels as referred to in the Public Finances Act.

Irrespective of the type of municipal bond issued, its admission to organized trading via Catalyst opens a number of possibilities that have so far been closed to private issues acquired in their majority by banks. What should be stressed above all, is the broad access to new investors such as open pension funds, which, due to the dematerialization of municipal bonds in the National Securities Deposit (KDPW), will be able to invest their assets in such bonds.

The question of associated costs when a local government decides to launch its bonds on the Catalyst market is not without significance. Generally, it may be asserted that the costs of being quoted on the Catalyst market (both fixed costs-regardless of the value of the issue, as well as variable costs-which depend on the value of the issue), are comparable and may be lower than the standard fees charged by banks which organize and are agents for issues. However, the organized market creates additional opportunities as mentioned above.

The Bonds Act gives both local governments and other entities, particularly corporate bodies and limited joint-stock partnerships, which do not have legal entity status, the right to issue bonds. It should thus be noted that the circle of entities allowed to issue bonds is broader than that of entities allowed to issue financial instruments such as shares. In consequence, the Catalyst market could become a convenient place for limited-liability companies (which are the most prevalent form of commercial company law firms operating in Poland) to acquire their capital resources. The variety of corporate bonds also gives flexibility to their form of issue. An extremely important consideration with corporate bonds is the safety aspect in this form of share issue: it is free of the risk of losing control over the company by way of hostile takeover.

The flotation of bonds on the Catalyst market imposes defined disclosure duties on their issuers. The scope of these duties will depend on the market the bonds are floated on, albeit the fundamental principle is that information reflecting the specifics of the situation, disclosed on a current and periodic basis, should be real, reliable and complete, and presented in a way that enables investors to assess the impact of the transmitted information on the business, assets and financial standing of the issuer or on the price or value of financial instruments. Corporate bond issuers are also duty-bound to disclose information by way of annual and quarterly reports. This is to give Catalyst greater transparency and may make corporate and municipal bonds more attractive to investors.

The launch of the Catalyst market should be viewed positively as a step in the right direction for the development of the bond segment which in the case of entrepreneurial and local government interest could become a valuable source of finance for smaller entrepreneurs such as limited-liability companies and local governments.

Robert Dulewicz, partner at Salans Capital Markets Team
Artur Cie¶liksenior associate at Salans Capital Markets Team
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