Nasdaq successfully introduced the First North Bond Market in 2012 in Denmark and Sweden, and in 2014 in Finland, to facilitate the issuing of corporate bonds by a broader group of companies, in line with market needs. The Baltic region has the same needs to offer SMEs new types of funding and to meet the demand of investors seeking higher yield in the current low interest rate environment.

 

Benefits of Corporate Bonds

The reason companies most often issue bonds is to raise needed capital. Bonds are an alternative to more traditional bank financing through loans.
 
Statistics show that Baltic companies are increasingly using corporate bonds to fund themselves, mainly in order to benefit from:
  • the possibility of longer maturity
  • typically, fixed interest rates and bullet redemption, meaning no amortization
  • reduced dependency on commercial banks
  • greater decision-making freedom, more flexible terms compared to bank loans
  • bond programs suited to financing large long-term projects
  • greater corporate publicity and visibility
  • ability to borrow even without collateral and/or positive cash flows, which is not possible with bank financing
     

Differences between First North and the Regulated Market

The First North Bond Market is a multilateral trading facility, or, in more common terms, an alternative marketplace. It is operated by Nasdaq with a separate rulebook and price list. Thus it can offer companies more flexible admission and other requirements compared to the regulated market.
 
First North complements the regulated market. Some issuers can get bigger benefits from the leaner admission process and requirements on the First North Bond Market, whereas other issuers find that their investors require admission to a regulated market. In short, First North gives both issuers and investors a wider range of possibilities.
 
Bonds can be admitted to trading on First North without a prospectus registered by the Financial Supervisory Authority (FSA), unless that is required by law. Moreover, while issuers on regulated markets must comply with International Financial Reporting Standards (IFRS), local accounting standards are sufficient on First North.
 
 

Admission Requirements 

The main admission document required for private placement is a Company Description, though in some cases a Securities Note is enough. A Company Description is a document containing information about the issuer and terms and conditions of the bond(s). Issuers whose securities are already admitted to trading on an EU or EEA regulated market, another First North market, or an equivalent recognized marketplace, are exempted from preparing the Company Description and can submit a Securities Note instead. This means that only a description of the terms and conditions of the bonds is required when other company-specific information is publicly available, at least in English, and is referenced in the document.
 
Issuers are obliged to engage a Certified Adviser during the application period, unless the issuer’s shares are already traded on an EU or EEA regulated market or another First North market. The Certified Adviser will advise and assist the issuer in this process. If the issuer and Certified Adviser decide to continue their cooperation during trading, the Adviser will also act as the initial supervisor and consultant.
 
Generally it is expected that an issuer of bonds with nominal value of less than 100 000€ should have a financial history of two years.  However, considering specific circumstances, the Exchange can make exceptions on the basis of a relevant application.
 
 

Ongoing Requirements 

The disclosure rules of First North are less stringent than those of the regulated market. The general rule is that all significant price-sensitive information must be disclosed via the Exchange’s official information distribution system. Minimal disclosure requirements include publication of:
  • Semi-annual and annual reports (including an auditor’s report)
  • Convocation of a bondholders meeting
  • Resolutions adopted by a general meeting of shareholders or bondholders meeting
  • Changes in management, etc.
If guidance is needed, issuers can always consult their Certified Advisers or contact the Exchange directly.