By Axel Reiserer
The leading Lithuanian retail chain Maxima Grupė (Maxima) and the European Bank for Reconstruction and Development (EBRD) are teaming up to introduce a new financial product in the Baltic markets: The EBRD is investing €4.2 million(US$4.99million) in a €40 million issuance of commercial paper (CP) by Maxima, the first issuance of such securities in the region.
The notes were subscribed by institutional investors represented from the Baltic states, Scandinavia as well as United Kingdom and other European countries. This is the first Commercial Paper transaction under such format in the Baltic region.
“The successful completion of the offering underlines the company’s high credit quality and intention to diversify our funding sources. Continuous cooperation with such large international players like European Bank for Reconstruction and Development, Nordic Investment Bank and others and their trust in our company is very important for us”, said Mantas Kuncaitis, CEO and Chairman of the Board of Maxima Grupė.
Maxima is the largest food retail group in the Baltics as well as the largest employer and second largest corporate in Lithuania. In 2018, the EBRD supported the company’s first issuance of a €300m public bond.
“We are very pleased to support this groundbreaking issuance and look forward to continue our successful cooperation with Maxima Grupė”, added Ian Brown, EBRD Head of the Baltics,
The EBRD’s support comes under the Bank’s new €75 million Commercial Paper Framework which aims at developing the market for tradeable CP to be issued by non-financial Baltic firms to address corporate financing needs and mobilise investment funds from institutional investors.
CPs are short-term unsecured notes issued by companies with a fixed-term maturity and used to address short-term liquidity or working capital needs. Demands for such alternative sources of finance are rapidly increasing in face of the current coronavirus pandemic.
The EBRD is working with the central banks of Estonia (Eesti Pank), Latvia (Latvijas Banka) and Lithuania (Lietuvos Bankas) as well as the Nordic Investment Bank (NIB) on the establishment of the pan-Baltic CP market. A Memorandum of Understanding sets out the principles in line with the best practices outlined by the European Central Bank (ECB).
The development of a Baltic CP market supports the European Commission Capital Market Union Initiative and is also part of the Bank’s COVID-19 response.
The EBRD has been actively involved in the development of capital markets in the three Baltic states and, in 2018 together with the European Commission, sponsored the signing of a Memorandum of Understanding between Estonia, Latvia and Lithuania to create a pan-Baltic capital market to strengthen their economies and stimulate investment to create jobs.
The EBRD has been investing in the Baltic states since 1991. To date, the Bank’s total investment there stands at more than €2.6 billion through almost 300 projects.