Hansapank receives major money shots

TALLINN - Hansapank, the largest bank in the Baltic states, received a large loan and sold a big chunk of its share capital last week to Swedbank.

A total of 2.67 billion kroons ($198 million) was deposited in Hansapank's account last week, 1.47 billion kroons of which came from a share issue and 1.2 billion kroons from a syndicated loan organized by the European Bank for Reconstruction and Development.

Hansapank has decided to use the money to pay back all its loans expiring this year and to lend money to Estonian companies.

"As the largest bank in the Baltics, Hansapank's financial soundness and its ability to retain the confidence of the people are important to the health of the Estonian banking and enterprise sectors," said EBRD Deputy Vice President David Hexter. "This project will therefore strengthen a key player and support it in meeting the financing requirements of the private sector."

The 150 million deutschemark loan that Hansapank received on Nov. 17 is the biggest syndicated loan ever received by an Estonian financial institution. By completing this major loan, EBRD is supporting the development of the banking sector in the wake of the Russian crisis, reports EBRD in its press release.

The loan comprises a five-year 50 million DM loan from EBRD and a three-year 100 million DM loan from participant banks.

"There was a slight oversubscription to the syndicate loan and the fact that the loan interest is slightly higher than it has been earlier is quite normal in the present complicated market situation," said Hexter.

According to Hansapank spokesman Mart Toevere, the interest rate is comparable to rates two years ago, but 1 percent higher than interest rates last summer.

"The money received from the loan will be used for the development of lending activities, but it should be kept in mind that the growth of Hansapank's loan portfolio may not exceed the growth of the deposits," said Toevere. "The amount of deposits decreased last month by 0.7 percent. We cannot predict a large increase in depositing although the interest rates on deposits have increased lately," explained Toevere.

The interest rate on Hansapank loans excluding the percentage, which comes from additional risks, is about 17 percent.

Originally, the loan from EBRD had been intended to refinance Hansapank's earlier loans, but the need for this disappeared in connection with the bank's recent stock issue.

Hansapank raised 1.47 million kroons from its recent share issue that will cover three loans that Hansapank has to repay during this year for a total of 1.4 billion kroons.

Swedbank, which underwrote Hansapank's issue at 100 kroons per share, bought most of the 14.708.890 shares issued from Nov. 2 to Nov. 15.

According to Lauri Lind, a broker at Hansapank, it was known that Swedbank would buy most of the shares, as the price of the shares issued was well above the market price. The average price of the Hansapank share during the subscription period was 57 kroons.

After the bank's entry of the stock capital expansion in the business register, Hansapank's share capital will rise from 588.4 million kroons to 735.4 million kroons, while the stake of Swedbank will rise to more than 60 percent. Swedbank has declared that its intention is to hold only one-third of the bank's share capital and the rest will be sold to a strategic investor.