An extended article in Hospodářské noviny deals with the risks wealthy Czechs are taking when they purchase bonds from Czech corporations. While the Czech National Bank regulates larger issues from domestic companies, investors looking for higher yields are often willing to take a chance on companies who issue less than CZK 25m at a time. Under current regulations, those are not regulated by the Czech financial system, leading to a headline in HN that reads “No one knows what the Czech bond market looks like”. The issue has been brought to the fore by the collapse of the on-line retailer Zoot, which which managed to issue CZK 250m in bonds by offering 6.5 percent interest payments for four years. Under a recently court-approved reorganization move, anyone who didn’t manage to sell Zoot bonds in time will only be getting 10 cents on the dollar from Zoot’s new majority owner, Natland. The company spent the past several months collecting secured debt Zoot took out from banks. HN reports that an amendment to the law governing the issuance of bonds would make it necessary for companies to list, in order of severity, all the risks they face in all prospectus documents. It will also require all bonds to be listed and to have its own ISIN code, which will mean that regulatory officials will finally be able to track the size of the Czech bond market.
