EBRD invests €37 million in LHV's first covered bonds

LHV headquarters in Tallinn.
LHV headquarters in Tallinn. Source: Priit Mürk/ERR

The European Bank for Reconstruction and Development (EBRD) has invested €37 million in the first covered bonds issued by LHV Pank, only the second in the Baltic states and the first by a domestically owned bank.

The investment supports the establishment of a still novel capital market instrument in Estonia and helps strengthen capital market resilience in the context of the coronavirus pandemic by increasing the supply of investable listed instruments for local and international investors.

LHV Pank, a subsidiary of the listed Estonian financial services group LHV Group, last Tuesday completed the inaugural issue of €250 million of covered bonds with maturity of five years.

LHV CEO Erki Kilu said in a press release on Monday: "The issuance of covered bonds marks a milestone for LHV in the bank's growth story. The successful outcome of the offering demonstrates the support that the investor community, including the EBRD, has offered to the bank."

The covered bonds backed by Estonian residential mortgage loans were offered to European institutional investors. In total 28 investors participated in the offering and the issue was oversubscribed 1.9 times.

Out of total order book, 41 percent was received from central banks and international institutions, 29 percent from institutional investors in Germany, Austria and Switzerland, 19 percent from Nordic investors and 11 percent from institutional investors in other countries.

The covered bonds were issued at a spread of 40 basis points over the mid-swap rate. Total re-offer yield of the covered bonds was 0.12 percent. The covered bonds will be listed on Euronext Dublin and the expected rating from Moody's Investors Service Ltd is Aa1.

Lucyna Stanczak-Wuczynska, EBRD Director, EU Banks, said: "We are very pleased to invest in this debut covered bonds issuance by LHV, and welcome the rebound of the debt capital market for the central and eastern Europe region with a robust market issuance by a local financial institution."

The EBRD has invested in the Baltic states since they regained their independence in 1992. To date, the bank has invested €2.5 billion in 291 projects in Estonia, Latvia and Lithuania combined, and in Estonia alone €793 million through 95 projects.


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Editor: Helen Wright

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