Transpordi Varahaldus OÜ (TVH) will issue 25 million euros worth of bonds with a maturity of eight years. The bonds will be bought in equal shares by LHV pension funds and LHV Bank, which is based on Estonian capital. TVH will use the capital raised to buy two CRJ900 aircraft and rent them to Nordica. According to member of the management board of TVH Ergo Blumfeldt, the expansion of the commercial undertaking that owns four CRJ900 aircraft at present is based on a thorough financial analysis and the positive results of the first financial year. TVH is a public undertaking that operates as a state-owned investment firm, and finances and manages fixed asset investments in the transport sector.
The head of LHV pension funds Andres Viisemann said that Transpordi Varahaldus is a young, but strong company and the bonds are well secured. “We are convinced that Nordica, which will be using the aircraft, is being reasonably built up,” added Viisemann. “Any major steps are taken only if there is reasonable reassurance that it is economically beneficial and improves the position of Nordica and Estonian aviation alike. The pensions funds would certainly like to be involved in more transactions like this. We earn income for the clients of our pension funds, but do it in a manner that also benefits the Estonian society.”
The Estonian airline Nordica is expanding its operations in the field of export services as planned and the new additions to the fleet will be used to support the growth of business volumes. The company’s CFO Ahto Pärl said that one of the planes will be flying in Nordica’s own route network and the other will start serving passengers on the flights of LOT Polish Airlines. Pärl said that one of the existing CRJ700 planes will be replaced with a bigger CRJ900 and the smaller aircraft will be left in Tallinn as a spare. “Nordica’s fleet and volume of flights have increased to the limit where having its own spare aircraft is economically reasonable,” added Pärl. “This will improve the quality and stability of our service even further, and help us save money.”
According to agreements, the first aircraft will arrive in Tallinn in June and the other in July. Both aircraft will start operating in early August. The planes were manufactured in the Bombardier plant in Canada in 2011 and have been well maintained, and they are equivalent to the models Nordica already owns. The Estonian airline will continue with the same type of strategy in order to maximise the cost-effective operation of its fleet.
This transaction is the biggest inclusion of commercial capital in Estonian aviation in history. The main financiers in the past have been owner or partner companies and the state. According to Nordica’s management, this confirms that Estonian capital has strong reasons to believe in the effectiveness and sustainability of the airline’s business model. The airline’s transparency and structure, which make it possible to differentiate risks and offer them the best financial solution, made deciding easy for the financier.
“The level of trust in Estonian aviation has reached a new level by today,” said Ahto Pärl. “We have believed from the very beginning that we’re moving in the right direction and this transaction proves that our strategy is working.”
LHV is the biggest national financial group and capital provider in Estonia. The main subsidiaries of the LHV Group are LHV Bank and LHV Asset Management. LHV employs ca 300 people and over 117,000 clients use LHV’s banking services. The pension funds managed by LHV have ca 180,000 clients.