Of Words and Bonds

“My word is my bond”, the motto in Latin on the coat of arms of London Stock Exchange, has long reflected the paramount importance of trust for any financial transaction.

Bulgarian government and central bank officials had been reported to have reassured the holders of dollar-denominated bonds of Corporate Commercial Bank in June that the investors would receive their money in full.

Those officials might have well believed their words will be enough to dispel investors’ concerns over a potential default on the bond by the troubled Bulgarian lender.

KTB, however, failed to make the final payment on the bond that matured on Friday and investors have threatened to take legal action against the state and the bank.

The negative impact of a default could be difficult to ignore in the long run with a potential costly and protracted legal battle looming that may harm Bulgaria’s credibility as a dependable investment destination and leave Bulgarian taxpayers with yet another bill to pay.

Thus, restoring investors’ trust might prove to be a much more difficult endeavour than restoring the trust of the Bulgarian public, which caretaker PM Bliznashki has promised will be a key goal in preparations for October snap election.

Branimir Kondov

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