Real estate development company Eika, which successfully issued its first securities two years ago, is today launching its second EUR 5 million bond issue, which has already attracted investor interest. Initial inquiries indicate that about one-fifth of the issue is planned to be purchased by investors from Eika Asset Management funds, Eika business partners and company employees.
“Currently, there are almost no opportunities in the market to safely lend money for a shorter period of time at a fixed return. Investors are interested in bond issuance as an alternative to direct acquisition of investment housing. The listed instrument markets are also reacting very painfully to forecasts of a potential recession, so investors are looking at alternative, lower-risk investment instruments,” says Domas Dargis, CEO of UAB “Eika”.
Interest rates will range from 5.5 to 6 percent.
Two-year bonds of UAB “Eika” will be distributed by Šiaulių bankas from September 8 to 23. The nominal value of one bond is EUR 1,000, so beginners and those who can allocate small amounts for investments will be able to invest their funds.
“We appreciate the decision of the company “Eika” to further promote the Lithuanian capital market by offering its second bond issue to investors. A strong and well-known real estate developer in the market provides an opportunity to raise funds in the Lithuanians’ favorite asset class and contribute to the implementation of modern projects. The success of the first bond distribution during the pandemic period demonstrated investors’ trust in the issuer, so we believe in the success of this capital raising stage as well,” says Domas Klimavičius, Head of the Investment Services Group at Šiaulių bankas.
According to the investment expert, persistent inflation is forcing residents to rethink their saving and investment habits, so Eika bonds can help diversify an investor’s portfolio.
Future investors will be able to bid on the bond interest rate (from 5.5 to 6%) by means of an auction when filling out bond purchase applications. Interest will be paid semi-annually.
Offer to first bond issue clients
Eika issued its first bond issue in November 2020, when it borrowed EUR 5 million on the market for two years at 5 percent annual interest. According to D. Dargys, clients of the first issue applied for the opportunity to invest in the second issue with higher interest rates.
“Clients of the first issue will be offered to refinance it, i.e. lend to Eika again at the interest rate set during the September auction. For example, if the auction sets an interest rate of 5.8 percent, the same will be offered to investors of the first issue who plan to refinance the bonds. Those who decide not to continue investing will have their bonds redeemed after they expire in November,” says D. Dargis.
Eika plans to direct the raised funds towards the development of housing projects in the capital’s Žvėrynes, Pašilaičiai and Bajorai. In total, it is planned to finance the construction of 320 apartments.
In 2021, Eika’s consolidated turnover increased by 26.3 percent, to EUR 52.2 million. Consolidated net profit last year amounted to EUR 9.52 million. In 2021, Eika sold 409 apartments in Vilnius city, the value of which amounted to almost EUR 49 million.
Reminders for those who have decided to purchase bonds
Eika reminds that in order to purchase bonds, you should have or open a Securities Account with one of the commercial banks or financial brokerage companies operating in Lithuania. If you have a current account with one of the banks, this can be done via online banking.
Companies planning to purchase Eika bonds are not required to have an LEI code, as the bonds will not be listed on the stock exchange.
Interest received from bonds up to EUR 500 per year is not taxable, and only the portion above EUR 500 will be subject to personal income tax at a rate of 15 or 20 percent, depending on the total income level.