The rating agency Moody’s assigned LHV Pank a credit rating of Baa1

Moody’s Investors Service assigned AS LHV Pank an investment-grade credit rating with a stable outlook. This is the first time LHV has obtained an investment-grade rating from an international rating agency.

Ratings assigned to AS LHV Pank by Moody’s Investors Service:

• Long- and short-term counterparty risk assessment of A3(cr)/Prime-2(cr)
• Long- and short-term counterparty risk rating of A3/Prime-2
• Foreign- and local currency long-term bank deposit rating Baa1
• Foreign- and local currency short-term bank deposit rating Prime-2
• Baseline credit assessment (BCA) baa3
• Adjusted baseline credit assessment baa3
• The long-term deposit rating carries a stable outlook

When assigning the ratings, Moody’s has assessed the quality and creditworthiness of the obligations of LHV Pank as well as the condition of the Estonian banking sector. With these ratings, Moody’s confirms that the financial profile of LHV is strong, as is its ability to serve the assumed obligations.

According to Erki Kilu, Chairman of the Management Board at LHV Pank, it took LHV only nine years from the application for a banking license to obtaining an investment-grade rating. “An investment-grade rating above all provides assurance to our customers, investors and creditors. The availability of a credit rating contributes to doing international business, facilitating the establishment of correspondent relations with other banks and enabling cooperation with international institutions in order to offer our customers financing solutions or guarantees. The credit rating is also necessary when engaging in trade finance,” Kilu commented.

When assigning the baseline credit assessment, the strong capitalisation and profitability of LHV Pank was considered, which provides a cushion against aggressive growth of the bank and the unseasoned loan portfolio.

The ratings of Moody’s have taken into account the supportive business environment of Estonia. Estonia is characterised by a dynamic economy and higher than the European Union average economic growth.

According to Moody’s Investors Service, the long-term deposits of LHV Pank carry a stable outlook. Moody’s believes that over the next 12-18 months, LHV Pank will maintain a steady performance and credit portfolio in the context of a similar operating environment.

LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are LHV Pank and LHV Varahaldus. There are 380 people working at LHV and more than 159,000 clients are using its banking services. Pension funds managed by LHV have more than 178,000 active clients.

The announcement on the report prepared by Moody’s

Outcome of Subscription to AS LHV Group Subordinated Bonds

Public offering of AS LHV Group subordinated bonds ended yesterday, on 27 November. Since the initial issue volume of EUR 16 million was oversubscribed, LHV used its right to increase the issue volume within the maximum permitted volume, to EUR 20 million.

Altogether 1,664 investors participated in the issue, subscribing to subordinated bonds for a total of EUR 51.147 million, that is, the initial issue volume was oversubscribed 3.2 times. The subscription period started at 10.00 on 14 November and ended at 16.00 on 27 November.

The Supervisory Board of LHV Group decided to allocate the subordinated bonds so that all subscriptions up to the threshold of EUR 10,000 were fulfilled and the remaining bonds were allocated based on the following principles:

1. LHV’s previous investors, whose subscriptions exceeded the threshold, were allocated 40.00% of the amount exceeding the threshold;
2. LHV’s previous customers, whose subscriptions exceeded the threshold, were allocated 15.00% of the amount exceeding the threshold;
3. New investors, whose subscriptions exceeded the threshold, were allocated 7.65% of the amount exceeding the threshold;
4. New non-customer professional investors, whose subscriptions exceeded the threshold, were allocated 3.00% of the amount exceeding the threshold.

All subscription orders of the same subscriber were summed up. The number of bonds with decimal places was rounded to the previous whole number.

Out of the 1,664 subscribers 73% received bonds in the desired volume. 27% of investors were allocated less bonds than they desired.

According to Madis Toomsalu, CEO of LHV Group, the results of subscription to LHV subordinated bonds were as good as expected. "The volume of subscription was the largest yet compared to our previous capital raising. Oversubscription of the first offering within the EUR 45 million bond programme was 3.2 times, which is why we decided to increase the issue volume to EUR 20 million, from EUR 16 million. The subscription was broad-based and close to 1,700 subscribers participated in it. As regards the allocation of bonds, we wanted to see all subscribers as our investors, however we preferred the existing securities’ owners and customers of LHV, nevertheless we also partially satisfied the subscriptions of all other interested investors. All in all 68% of new bonds went to existing investors, 22% went to our clients and 10% were allocated to new investors,” Madis Toomsalu commented.

LHV will use the subordinated capital raised from investors for expanding business volumes of LHV Group within the own funds and if possible, for early redemption of the existing bonds.

The offering is the first part of the previously accepted bond programme. Under the programme, LHV intends to issue subordinated bonds worth up to EUR 45 million within several issues.

The first issue of LHV includes 10-year subordinated bonds with a nominal value of EUR 1,000, annual interest rate of 6.0% and redemption date of 28 November 2028. The bonds will be transferred to the investors’ securities accounts on 30 November 2018, will be listed and admitted to trading on the Baltic Bond List of Nasdaq Tallinn Stock Exchange on 3 December 2018.