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Moody’s Investors Service has assigned a long-term provisional (P) Aa1 rating to the home equity bonds issued by AS LHV Pank.
The international credit rating agency Moody’s analyzed the planned issuance of guaranteed bonds by LHV Pank and considered, among other things, the high credit quality of the assets that support the covered bonds, the support provided by the Estonian legal framework, which establishes the issuer regulation. and supervision, but also exposure to market risks and the growing uncertainty of the current economic environment. The Aa1 long-term rating (P) indicates high-quality obligations that are subject to very low credit risk.
“Obtaining a credit rating is an important step in continuing to prepare for the bond issue as planned and although the final date is subject to the market situation, we plan to issue the covered bonds in early summer,” said Erki Kilu, the Chairman of the LHV Pank Board of Directors. “LHV has always maintained a conservative position regarding liquidity management, and covered bonds offer an opportunity to further diversify financing and reduce costs. The cost of more expensive deposits, collected through deposit platforms, can be reduced by issuing residential mortgage-backed bonds “In the long run, this will also lead to a more favorable cost of financing for our clients,” added Kilu.
LHV Pank plans to offer covered bonds to European institutional investors.
Covered bonds are expected to provide a resilient new source of financing for LHV. Covered bonds also provide LHV with the opportunity to use the liquidity offers of the European Central Bank.
At the proposal of the Estonian Financial Supervisory Authority, AS LHV Pank received an authorization from the ECB to issue covered bonds on March 18, 2020. Legislation allowing the issuance of covered bonds under the Estonian Covered Bond Law entered in force in Estonia in March 2019.
LHV began issuing mortgage loans in 2016. With the acquisition of the private client loan portfolio of the Danske Bank A / S Estonia branch in 2019, LHV achieved a sufficient volume of mortgages to issue covered bonds.
LHV Group is the largest national financial group and provider of capital in Estonia. LHV Group’s key subsidiaries are LHV Pank and asset management company LHV Varahaldus. LHV employs more than 450 people. LHV’s banking services are used by almost 217,000 clients, and LHV-managed pension funds have almost 178,000 active clients.
Ron Priit
Communication manager
Telephone: +372502 0786
Email: [email protected]
