EBRD invests in Luminor senior bonds

Location:

Regional

Project number:

50023

Business sector:

Financial institutions

Notice type:

Private

Environmental category:

FI

Approval date:

23 May 2018

Status:

Cancelled

PSD disclosed:

18 Oct 2018

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Investments of up to EUR 200 million in a series of senior bonds (incl. Senior Preferred and Senior Non-Preferred bonds) to be issued by Luminor Bank AS in Estonia ("the Issuer") under the Euro Medium Term Note Programme ("Programme") until November 2022 and admitted for trading on the Irish Stock Exchange. EBRD's investment in each issue will be limited to up to 20% of the aggregate principal amount of each issue.

On 10 October 2018, EBRD invested EUR 60 million in the issuance of EUR 350 million senior bonds under the Programme.

On 11 June 2019, EBRD invested EUR 40 million in the issuance of EUR 300 million senior bonds under the Programme.

On 25 November 2020, EBRD invested EUR 18 million in the issuance of EUR 300 million senior preferred bonds under the Programme.

Project Objectives

The project aims to support the Issuer raise medium-term funding in the capital markets in order to diversify the funding sources, build the funding base to comply with the Minimum Required Own Funds and Eligible Liabilities (MREL), and establish itself as a self-sustainable pan-Baltic financial institution. In addition, EBRD investments in November 2020 and afterwards will support EBRD's Green Economic Transition (GET) objectives in the Baltics with the Issuer agreeing to allocate 100% of the EBRD's invested amount into GET-eligible projects.

Transition Impact

ETI score: 61

The project will support the resilience of the financial sector and markets by (i) increasing the supply of investable listed instruments for local pension funds and other institutional investors (incl. Senior Preferred and Senior Non-Preferred bonds), (ii) helping the diversification of the funding sources for the Issuer, and (iii) supporting an orderly replacement of two Nordic banks, while mitigating the risk to stable and competitive financial intermediation in the Baltic countries. The Competitive transition quality is underpinned by the Issuer's ability to derive efficiency gains from further operational restructuring and improved funding mix.

Client Information

LUMINOR BANK AS

Luminor was established in October 2017 through the merger of Nordea Bank Abp's and DNB Bank ASA's operations in the Baltics. Based in Estonia (with banking branches in Latvia and Lithuania), it is the third largest banking group in the Baltics with market share of 17.4% in lending across the Baltics. In October 2019, a consortium of private equity funds managed by Blackstone acquired a majority stake in Luminor. It is a systemic bank directly supervised by the European Central Bank ("ECB").

EBRD Finance Summary

EUR 118,000,000.00

In the first issuance under the Programme, EBRD invested EUR 60 million.

In the second issuance under the Programme, EBRD invested EUR 40 million.

In the first issuance of MREL-eligible Senior Preferred Bonds under the Programme, EBRD invested EUR 18 million.

Total Project Cost

EUR 950,000,000.00

The size of the first issuance under the Programme was EUR 350 million, the size of the second issuance was EUR 300 million, and the size of the first issuance of MREL-eligible Senior Preferred bonds was EUR 300 million. The total size of the Programme is EUR 3 billion.

Additionality

Additionality stems from supporting the intorduction of MREL-eligible senior preferred (and potentially senior non-preferred) as new instruments for banks in Baltics in an environment adversely affected by COVID-19, the allocation of EBRD's invested amount into GET-eligible projects, and the modest levels of oversubscription in the first two issuances.     

Environmental and Social Summary

Categorised FI (ESP 2014).  Due diligence has shown that Luminor Bank (Luminor) has designated staff in each country responsible for oversight of Environmental & Social issues, and whilst they do not have a formal Environmental and Social Management System in place Luminor does have a Corporate Social Responsibility Policy which set out it's E&S policy commitments.  For this transaction Luminor will be required to comply with PRs 2, 4 and 9 and submit Annual E&S Reports to the Bank on implementation of the E&S requirements and compliance with the PRs. To support their implementation of the EBRD's PRs, Luminor has been provided with guidance on how to implement PRs 2 and 4 as well as the E&S Due Diligence Toolkit; EBRD's E&S Risk Management Procedures for Corporate, SME and Micro Lending; access to the EBRD's E&S e-Learning training programme and to EBRD's sub-sectoral industry guidelines.

Technical Cooperation and Grant Financing

None

Company Contact Information

Nick Turnor
ir@luminorgroup.com
+372 628 3300
+3726283201
https://www.luminor.ee/en
Luminor Bank A.S. Liivalaia 45 10145 Tallinn Estonia

PSD last updated

16 Dec 2020

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

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Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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Tel: +44 20 7338 6794
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General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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