Experts: No reason to consider LHV's loan offer to Tallink extortionate

Tallink's Megastar, usually a passenger ferry, is now being used for cargo only.
Tallink's Megastar, usually a passenger ferry, is now being used for cargo only. Source: Andres Raudjalg/Tallink

The offer made to LHV Tallink is ordinary and the offer does not need to be considered extortionate, experts say. At the same time, it does not make sense for a shipping company to consider a loan on market terms if the alternative is state aid.

On Thursday, LHV Varahaldus together with Novalpina Capital, an independent private equity firm, announced it had made a financing offer of €200 million to Tallink.

CEO of Baltic Sea shipper Tallink Paavo Nõgene told ETV's "Esimene stuudio" on Thursday evening the loan offer LHV made to Tallink was extortionate and contrary to any and all business ethics.

Kristjan Hänni, a partner of the investment company Kawe Kapital, said companies can make such offers to each other. "Anything can be offered," said Hänni.

He said such offers are interpreted on the market, and if the offer can be considered semi-extortionate, it will not be accepted. However, in his opinion, the offer cannot be considered extortionate. Hänni noted the company has no obligation to accept it.

Henrik Igasta, Managing Partner of Superia Corporate Finance, said LHV's loan offer to Tallink cannot be considered extortionate based on the publicly announced terms.

He said it is difficult to comment on the topic without seeing the full package, but it seems to be a normal offer. However, Igasta expressed surprise that LHV publicaly disclosed the offer it made to the shipping company.

Igasta pointed out Novalpina Capital, which has made a loan offer together with LHV, is not a loan company and probably wants a stake in the company.  "Novalpina is not a loan company. It is an instrument that converts into capital in one way or another," he added.

"Their expectation of a return on capital is definitely higher immediately," Igasta said. "It is clear that if the alternative is state liquidity assistance as a crisis measure, then, of course, such a private solution may seem like extortion."

At the beginning of April, Tallink announced that it needed a liquidity loan for three years due to the coronavirus outbreak and its economic effects. At that time, the company offered direct loans, temporary share capital increases and bonds as solutions.

On Thursday, Minister of Finance Martin Helme (EKRE) said the state plans to offer Tallink a liquidity loan of €150 million, which could later be formalized as the state owning a stake in the company. However, Helme said it may be necessary to amend the law to carry this out.


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Editor: Helen Wright

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