BDO LAW drafted standard documentation for Nasdaq Baltic to simplify capital attraction
13 April 2015
Based on its experience in the Nordic countries, Nasdaq Baltic exchange has joined forces with BDO LAW, as well as financial consultants from Baltikums Bank (Latvia), Orion Securities (Lithuania) and Redgate Capital (Estonia), for developing standard legal documentation necessary for issuing bonds. The aim of the project is to facilitate access to the securities market and make financing of business through bond issue more attractive The templates are available to anyone free of charge on the Nasdaq Baltic website www.nasdaqbaltic.com.
The aim of the project is to facilitate access to the securities market and make financing of business through bond issue more attractive The templates are available to anyone free of charge on the Nasdaq Baltic websitewww.nasdaqbaltic.com. Being aware that one of the factors that might be hampering issuers on the Baltic market are relatively complicated EU requirements that the prospectus must meet, the project team worked to simplify the process of drafting legal documentation and reduce the costs. “Bond issue financing allows smaller as well as larger companies – as long as they are being managed well – an access to expanding sources of financing, diversifying their loan liabilities and increasing recognition among investors,” says Maija Orbidāne, Senior Specialist for Issuer Services at Nasdaq Baltic, when commenting 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 bonds: 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 bonds may be unsecured (which would often be a problem with attracting loans from a bank). Because issuing bonds 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. However, compared to Nordic Countries and Western Europe, 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, bonds) 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 bonds.