Capital Attraction Procedure Becomes Easier for Businesses

Taking into account the experience of Nordic countries, Baltic regulated market organiser Nasdaq joined forces with the VARUL law office, as well as financial consultants from Baltikums Bank (Latvia), Orion Securities (Lithuania) and Redgate Capital (Estonia), to develop standard forms of legal documents necessary for issuing notes, with the aim of facilitating access to the securities market. The forms are available to anyone free of charge on the Nasdaq Baltic website www.nasdaqbaltic.com.

Aware that one of the factors that might be hampering issuers on the Baltic market are relative complicated requirements that EU directives specify for an issue prospectus, the project organisers worked to simplify the process of drafting legal documentation and reduce the costs it involves. 

“As a result of this cooperation, we have adapted standard emissions prospectuses, issue terms and conditions for each of the countries, accounting for EU requirements. They should be a real help with filing documents, and the forms are available in local languages as well as English,” VARUL Law Office senior lawyer Alise Eljašāne comments on the joint project’s achievement.

“Attracting financing with notes allows smaller as well as larger companies – as long as they are being managed well – access to expanding sources of financing, diversifying their loan liabilities and increasing recognition among investors,” Maija Orbidāne, Senior Specialist for Issuer Services at Nasdaq Baltic, comments on expected benefits. “The environment as it is now is rather complicated for companies, so with this initiative we want to eliminate these barriers and simplify the process of attracting capital for anyone that opts for issuing securities as a preferred capital attraction alternative." 

Since 2013, Baltikums Bank AS has been the organiser of a number of note issues, helping companies in finance and industry attract funding from private as well as institutional investors. Edmunds Antufjevs, the bank’s Head of Investment Origination, explains the advantages of issuing notes: achieving the necessary amount in financing (with or without a bank loan), diversifying the investor base (with pension and investment funds, private individuals, banks etc.), establishing a public credit history, and the fact that an issue of notes may be unsecured (which would often be a problem with attracting loans from a bank). Because issuing notes requires drafting of technical documentation, the guidelines developed for businesses allow them to evaluate the range of documents required in practice. 

Specialists note that it is Latvia where companies in the Baltic states are most active in issuing bonds and in placing issues on the regulated market to improve recognition by investors.

Compared to Nordic Countries and Western Europe, however, the Baltic states have relatively inactive securities markets. It is a trend worth changing – businesses that want to attract additional funding would do well to consider that issuing securities (namely, notes) is a solid alternative to traditional bank loans. It can foster healthy competition between the two kinds of financing, potentially improving financing terms and conditions, as well as promote direct cooperation between a borrower and lenders that is enabled by an issue of notes. 

Edmunds Antufjevs
Head of Investment Origination Baltikums Bank