OREANDA-NEWS. June 26, 2013. SORAINEN Estonia advised Hupoteeklaen (www.hypoteeklaen.ee), the leader in the Estonian non-banking mortgage loan market, on a EUR 4 million secured bond issue for a term of three years with an annual fixed interest rate of 8%. The issue was successful: the bonds were sold to Baltic institutional investors.

The current bond issue is part of Hupoteeklaen's growth strategy. The company offers mortgage-secured loans in Estonia and intends to expand its loan portfolio in response to growing interest from the market. Bonds are secured by claims pledges and pledges over mortgages.

This particular transaction is noteworthy because it included lowering the ranking of the bank’s commercial pledge (encumbering all claims of the pledgor, among others) that stepped down to give first priority ranking to the pledge of certain specific claims and mortgages for the benefit of bondholders (acting through a security agent). The requirements for the change of ranking of securities are not clearly regulated under Estonian law nor is there market or court practice for that matter.

The transaction also included Estonian law-governed regulation of parallel debt which is also not clearly regulated under Estonian law nor has it been tested in the Estonian courts. This was also one of the first local security agency transactions after the Estonian Financial Supervision Authority adopted guidelines to regulate the competence of a security agent.

SORAINEN acted as legal adviser for the bond issue and advised on Estonian law. SORAINEN advice covered structuring the transaction including the security package, drafting and negotiating the bond documentation (including General Terms and Conditions, Final Terms and Purchase Offer), the security package for the bond issue (Claims Pledge Agreement and Mortgage Pledge Agreement) and amendments to the Commercial Pledge Agreement as well as advising the client and the financial advisor on the transaction throughout the transaction process.

Hupoteeklaen was advised by partner Reimo Hammerberg, senior associate Risto Agur and associate Helen Ratso.