EBRD joins covered bond issuance of Estonia’s LHV Pank

By Axel  Reiserer

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Bank invests €37 million in inaugural covered bonds issuance by LHV Pank

  • EBRD invests €37 million in debut covered bonds issued by LHV Pank in Estonia
  • Second issuance of covered bonds in the Baltic states
  • Investment complements EBRD’s policy reform engagement

The European Bank for Reconstruction and Development (EBRD) 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.

The development and integration of the capital markets in the Baltic states has been the backbone of the EBRD’s policy engagement in the region. In 2017, the three Baltic states signed a Memorandum of Understanding to create a Pan-Baltic Capital Market. As part of this extensive policy dialogue with the Estonian authorities, the Estonian Covered Bond Act was adopted in 2019 which enabled this issuance.

Lucyna Stańczak-Wuczyńska, 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.”

LHV CEO Erki Kilu added: “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.”

LHV Pank has grown rapidly since it was set up in 2009 and is the fourth largest bank in the country by total assets with market share of 10.7 per cent at the end of 2019. It is fully owned by LHV Group, a listed entity on the Tallinn Stock Exchange.

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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