RIGA - Parex Bank placed a 1.2 million euro bond on behalf of Ober-Haus Real Estate Agency in what is being tauted as a first-of-a-kind high-yield bond issue on the Baltic markets.
Bank spokesman Viktors Zakis said that the annual interest rate on the three-year, unsecured bonds is 16 percent, and that they would be paid off gradually starting in the second year.
Some 30 investors, including investment funds and individuals, participated in the placement of the bond issue, which took over a year to organize, though investor demand had been nearly twice as high as the amount of the bond issue, Zakis said. "Great activity by investors confirms their readiness to work in the high-yield debt securities market in the Baltic states," he said.
The placement of these high-yield bond - similar high-yield, unsecured bonds are often referred to as "junk" by many investment advisers - has signaled the beginning of a new segment on the debt market where borrowers can attract an alternative source of funds and investors can diversify their portfolios and receive high returns.
For borrowers with a rapidly expanding top line but minimal profitability, high-yield bonds offer an attractive alternative to collateralized loans or equity finance, banking analysts said.
Ober-Haus, the largest real estate company in the Baltics, will use the funds raised as part of a management/employee buy-out of the agency arm of its business from the Apollo Real Estate Investment Fund III, Chairman Paul Oberschneider said.
Ober-Haus operates in the Baltics and the Central European region. The company has offices in Poland and the three Baltic states and employs over 320 people.
Parex Bank is the largest bank in Latvia in terms of assets and the third in the Baltics.