MFB to raise $400-500 mln in bonds this year

Banking

Hungary's state-owned development bank, MFB, plans to raise $400-500 million, or more in global bond markets this year as it looks to boost economic growth by stepping up lending to local businesses, as well as funding major infrastructure investments, MFB chairman and CEO Laszlo Baranyay said in an interview with The Wall Street Journal. MFB wants to issue dollar-denominated bonds, Baranyay said. The Hungarian government raised $3.25 billion in bonds in February, in its first foreign bond issue in almost two years. MFB last tapped global markets in 2011, raising €500 million. Demand for the government's recent bond issue was large, but Moody's Investor Service warned last week that volatile markets could raise funding costs for MFB. Baranyay they will watch the markets closely, adding that the issue's timing would also depend on credit-expansion schedules, otherwise the bank could end up "sitting on funds and making losses." MFB plans to lend a net HUF 100 billion this year, up more than 10% from 2012, as the bank seeks to offset a decline in lending from commercial banks, Baranyay said. MFB could raise its share of the Hungarian corporate market to 12.0%-12.5% this year from the current 11.5%, he said. "There is demand for credit, but that demand isn't always well founded," Baranyay said. MFB offers working-capital and development loans, as well as loan guarantees and loans for infrastructure development to corporate borrowers, small and medium-sized companies and agricultural firms in particular. MFB also holds ownership stakes in some 50 fully or partly state-owned companies. "Companies face a much more difficult environment and they need fast and cheap financing," Baranyay said. At the same time, tightened regulations and an uncertain outlook have made banks less keen to lend. "Our role is to help find some kind of solution," he said. MFB "is set to provide relief for this situation in line with EU regulations," he said. "We have to balance market conditions with regulatory requirements and still help companies to expand. It's like walking a tightrope." MFB issued HUF 100 billion in forint bonds last year. From that, EU funding and reserves, the bank's funding needs for 2013 "can be ensured already," Baranyay said. But the bank is keen to expand its business and is also involved in some large-scale projects. MFB is participating in the construction of a gas pipeline connecting Hungary and Slovakia. If the government goes ahead with plans to launch a fourth mobile-service provider, it will "require major investments" that would be financed by MFB, the chairman and CEO said.

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