Considering the geopolitical situation and the growing interest of investors, the defence bond market in Latvia could develop as part of a wider transformation of the Baltic region’s capital market. Recently, the first issue of defence bonds in the Baltics was carried out – in the amount of EUR 25 million for the benefit of the by Lithuania’s state-owned investment company Valstybės investicinis kapitalas (VIK), marking a new stage in the development of the region’s capital markets and national security financing.
This transaction is VIK’s fourth bond tranche under the €400 million European medium-term bond programme. Investor demand in this tranche exceeded €35 million, significantly surpasing the initial target of €25 million. The bonds attracted strong interest among institutional investors throughout the Baltics, as well as among international financial institutions.
“This issue marks an important moment in the Baltic capital markets, as for the first time capital markets are being opened directly to the defence sector. This project, which includes the construction of the Rheinmetall plant in Lithuania and the development of other important defence infrastructure, demonstrates the financial sector’s ability to make real contribution to the security of the Baltics. For the Luminor team, organizing this issue was more than just technical work – it is a strategic commitment to support regional projects and attract international investors to the Baltic region. It also demonstrates the ability of the Baltic financial system to adapt to today’s geopolitical needs. We hope to welcome also Latvian and Estonian defence issuers to the capital market soon and are ready to support them in this process. Bond issuance in the security and sustainability sectors – especially energy and infrastructure – will become increasingly popular thanks to European Union funding, public-private partnership models and investor demand for environmental, social and governance criteria (ESG) projects,” says Gints Belēvičs, Head of Luminor Financial Market Department.
Valstybės Investicinis Kapitalas has become the first issuer to list its bonds in the Nasdaq’s new European Defense Bond Framework, which is designed to provide transparency and clear guidelines for financing defence projects.
As reported by Nasdaq Baltics, the bonds have a 4-year maturity and carry a annual interest rate of 3.119% – up to €71 million of the bond programme will be dedicated to the construction of the Rheinmetall factory in Lithuania. The remaining funds will be allocated to various other defense and security initiatives, with further details to be disclosed in future tranches. The project has been granted the status of “State Significance” in Lithuania.
Luminor Bank acted as the Sole Arranger and Dealer for the transaction, while legal advice was provided by Ellex Valiunas. The bonds are listed on the Nasdaq Baltic Bond List by the Nasdaq Vilnius Stock Exchange.
