The bonds of small loan company went as fast as warm buns (Äripäev)

10 Jun 2013

Not only large companies like Tallink Group and Estonian Energy ask for money from investors through bonds. In the beginning of May, Hüpoteeklaen OÜ, which lends money to its clients, successfully sold bonds in the total amount of 4 million euros after it was abandoned by the banks. One of the 30 investors was also one Estonian pension fund.

Toomas Paju, the owner of Hüpoteeklaen OÜ that operates since 2009, was satisfied with the outcome of emission despite the fact that arranging the emission was rather expensive. “Even one pension fund bought bonds,” was Paju positively surprised. One of the advantages of issuing bonds is that you can sell bonds by parts. Altogether, almost 30 investors bought company’s bonds.

ERGO was the pension fund that supported Hüpoteeklaen OÜ. “As bonds are secured by the loans, which in turn are doubly secured by real estate, and as the investment is rather short-term, I am sure that the risk level of the investment is not high for a pension funds,” explained the investment into a small loan company ERGO Pension Fund’s Manager Madis Reinumägi.

When in 2011 Hüpoteeklaen OÜ had to engage the money with the interest rate of 6-24% according to the annual report, then this loan from investors was with 8%, and Paju is satisfied with it.

The proceeds will be used for refinancing the existing loans of the company with 10 million euro loan portfolio.

“We invented a bicycle with these bonds,” commented Paju, who previously worked in Nordea bank for 12 years. Namely, the bonds are secured by the real estate that is the collateral for the loans given out to the clients by Hüpoteeklaen OÜ.

Aare Tammemäe, the board member of Redgate Capital which was the financial advisor for the emission, said that Estonian investors believe more in the bonds, but emphasized that bonds must be definitely secured. “I believe that the first birds will give a push, and the companies will issue bonds and they will be bought more once again,” added Tammemäe.

Original article can be found here.