What actually is the Bulgarian state bond?
Government securities are debt instruments issued by the Government of the Republic of Bulgaria, the holders of which receive bonuses in the form of interest payments at fixed dates. These payments are constant and based on a predetermined percentage.
Government Securities are not the only financial instrument that the Bulgarian law offers as an investment opportunity, but is the MOST preferred since it is considered the lowest risk and guaranteed state payment.
Buying Bulgarian state bonds without having the funds
Buying Bonds via Bank credit is a common practice by candidates who, at the time of applying for the Bulgarian citizenship program by investments, do not have the necessary funds. This is no problem as the result of the program does not rely how did you buy the bonds- by your own funds, or by Bank credit. As soon as you cover the minimum, required by Law, your Citizenship application will be proceeded.
What can you do?
Applying for a bank loan allows the investor to acquire Government securities and to apply for the Bulgarian citizenship program by investments without the funds available, by covering the statutory minimum of at least BGN 2 million.
How does credit purchase of the Bonds works?
Fortunately, not so difficult! Upon approval by the Bank, the applicant receives the necessary funds to purchase Government securities at a certain interest rate for the period of the bank loan agreement. With the purchase of government securities, the investor finances the state, which in turn pays interest to him/her in coupon payments. The longer the one issue of government securities is, the higher its interest rate.
Thus, as an investor, he/she receives fixed regular payments in the form of interest based on a predetermined coupon rate, while participating in a program to acquire Bulgarian citizenship through investments.
At the end, who wins?
The investor can make a great profit from receiving interest, while successfully finalizing a program and acquiring Bulgarian citizenship and a European passport after the statutory deadline.
So is it a win-win situation, or not quite?
The trade off between buying on margin and buying with own funds (if of course available)?
Buying on margin implies paying debit interest to the bank. However, on the other hand, the investor is entitled to the “fruits of his investment”, namely the bond coupon or the capital appreciation in case of investment in shares (equities). At the end of the day, the investor can achieve a positive result thereby offsetting the debit interest towards the coupon or the capital appreciation. What the final result will be can be determined only after specifically executed analysis (a paid service) or with the time when the graph of the investments can produce systematic results.