At the end of October, real estate (RE) development company Eika will begin distributing a bond issue worth EUR 5 million. The company, which has decided to issue securities for the first time, hopes to attract not only large institutional but also retail investors looking for reliable investment instruments offering fixed interest returns.
Two-year UAB “Eika” bonds will be distributed by AB Šiaulių bankas from October 26 to November 11. The planned annual interest rate is from 4.5 to 5 percent, and the exact interest rate will be determined by auction – market participants, future investors, will be able to offer them by filling out bond purchase applications. The nominal value of one bond will be EUR 1,000, so it is expected that new retail investors will join the capital market, who will invest in bonds for the first time.
“Bonds issued by NT companies in Lithuania are still a relatively rare way of raising funds, unlike in other countries, for example, in Estonia or the Scandinavian region, where companies with many years of experience are constantly looking for alternative borrowing methods. In this way, companies seek to diversify their sources of financing and borrow not only from banks, but also from institutional or retail investors,” says Domas Dargis, CEO of Eika.
“The entry of reliable companies from real estate and other sectors into the capital market creates wider opportunities for investors, who are constantly looking for a variety of investment instruments in an environment of low deposit interest rates. It is beneficial for both companies and investors that this method of raising funds is rapidly becoming popular in Lithuania,” he says. Tomas Varenbergas, Director of the Markets and Treasury Department of Šiaulių bankas.
Interest – semi-annually, redemption – after two years
According to D. Dargys, bonds are one of the safest investment instruments, as the investor receives a fixed return in the form of interest. In addition, Eika’s bonds are short-term – they will be redeemed after two years. Interest will be paid to investors every six months.
“Over the past 27 years of operation, we have developed a diversified commercial real estate portfolio, including the office complexes “Live Square” and “Dvyniai”, the shopping centers “Pupa” and “Smiltė” and the hotel “Hilton Garden Inn”. The rental income from these objects currently ensures a balanced cash flow in the company, and it will also be used to cover bond interest. An institutional investor has already expressed interest in the bonds being distributed, with whom we are currently negotiating the redemption of part of the bond issue,” says the CEO of “Eika”.
The company plans to allocate the raised funds to the development of future Eika Group projects, and primarily to the co-living apartment project planned for Šv. Stepono Street.
The consolidated revenue of the real estate development and construction group Eika last year reached 53.3 million euros, i.e. 11.5 percent more than in 2018. In 2019, Eika sold a record number of apartments – 450. Also, in July 2019, the company completed the development of the multifunctional complex Live Square worth 49 million euros, which consists of the Live Square business center with a shopping gallery and a roof terrace, the Hilton Garden Inn hotel and residential apartments.
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