Tax advantages for bondholders, new investment strategy, and other winter innovations

Riga, Latvia, December 17, 2015, 08:37 / Banking

Tax advantages for bondholders, new issues of ABLV bonds, new investment strategy and lombard lending for clients of ABLV Bank Luxembourg, refined oil products swaps, uniform courier mail rates and charges, modern premises of representative office in Moscow — these are the main improvements in our products and services, which will be implemented in the following months for our clients' convenience.

1.  ABLV bond issue programme is continued

The size of our bond issue programme keeps growing. Currently, 21 bond issues of ABLV Bank are publicly traded, and their total face value exceeds EUR 600 million.

Under the bond issue programme, we perform new issues of ABLV Bank bonds three times per year. On 17 February 2016, as scheduled, two issues of straight bonds will be redeemed. Therefore, two new issues of equal size will be performed at the beginning of 2016 — issues of straight coupon bonds amounting to USD 75 million and EUR 20 million.

The subscription to the bond issues will be started on 4 January 2016 and will last till 15 February 2016. The parameters of the issues are stated below.

  • Coupon bond issue of USD 75 000 000
    (issue name: ABLV FXD USD 220218; ISIN: LV0000801991)
    The issue size is USD 75 000 000. The number of bonds is 75 000. The face value of one bond is USD 1 000. The annual interest rate is fixed: 1.85% with coupon payment twice a year. Initial placement price: 100% of the face value. The issue date is 22 February 2016, and the maturity date is 22 February 2018.
  • Coupon bond issue of EUR 20 000 000
    (issue name: ABLV FXD EUR 220218; ISIN: LV0000802007)
    The issue size is EUR 20 000 000. The number of bonds is 20 000. The face value of one bond is EUR 1 000. The annual interest rate is fixed: 0.70% with coupon payment twice a year. Initial placement price: 100% of the face value. The issue date is 22 February 2016, and the maturity date is 22 February 2018.

The final terms of offers are available in ABLV Bank Bonds section.

2.  New investment strategy for clients of ABLV Bank Luxembourg

Our subsidiary bank in Luxembourg, ABLV Bank Luxembourg, S.A. renders services to the clients for more than two years already and offers two investment portfolio management services — Active Investment Advisory and Discretionary Portfolio Management.

Under the said services, the clients are able to choose among three types of investment strategies: Capital Preservation, Defensive, and Balanced ones.

Taking into account the demand, from January 2016, ABLV Bank Luxembourg will offer new investment strategy — Growth. This strategy is supposed for substantial increase of invested assets with acceptance of considerable risk of loss. Compared with the other strategies, the new one implies including much higher portion of shares in the client’s investment portfolio.

3.  Lombard lending for clients of ABLV Bank Luxembourg

We have prepared one more new service for clients of ABLV Bank Luxembourg — lombard lending, which will be available from 2016. This service is actually an overdraft on the current account, and we grant it against pledge of the portfolio under Active Investment Advisory or Discretionary Portfolio Management.

Using this service, the clients will be able to obtain funds without selling their investment portfolios, and those funds can be applied towards various purposes, e.g., increase of the investment portfolio. The term of the lombard loan is not limited (whereas the bank is entitled to request early repayment of the loan), and it can be obtained in USD and EUR.

Under the lombard loan available to clients of our Luxembourg bank, the ratio of the financing amount to the pledge is determined much more conservatively than under providing financing against pledge of investment portfolio, which is available to clients of the bank in Riga.

4.  New financial instrument — refined oil products swaps

Developing our brokerage services, from 4 January 2016 we will offer refined oil products swaps, i.e., the agreements on changing floating price of the asset (oil product) to fixed one, or vice versa, for a set term and to the agreed amount. Such transactions are made over-the-counter, but settlement is ensured by stock exchange.

Those agreements are usually used for price risk hedging, i.e., minimizing the risk of price changes. The service will be useful for clients trading in oil products in the CIS and European states, as well as for those using trade finance, announced in ABLV autumn product release, for regular transactions in oil products. Standard fee for transactions in swaps will be equal to USD 0.50 for metric ton (min. USD 250 per transaction). When opening the position, the clients will need to ensure cash account balance sufficient for meeting stock exchange margin requirements.

5. Qualified Intermediary status and tax advantages for bondholders

Long and intensive process has been completed, and thus ABLV Bank has acquired the status of Qualified Intermediary (QI) of the US Internal Revenue Service (IRS). This status ensures significant advantages for our bank and the clients.

Due to acquisition of QI status, at the first stage, starting from 1 January 2016, we will be able to apply reduced US tax rates to coupon payments on bonds of the US issuers that are included in our clients’ securities portfolios, according to the tax residence declared by the client. For example, if our client is a non-resident of the USA (the client has proved it by submitting a respective W-8BEN or W-8BEN-E tax form), the tax rate of 30% applied to coupon payments on bonds of the US issuers earlier will be reduced to 0%.

6. Uniform rates and charges of courier mail dispatch to ABLV clients

From 1 January 2016, the rates and charges of courier mail dispatch will become more clear. Earlier, charges were applied according to actual expenses, but from the said date, particular fixed charges will be effective depending on the mail destination.

Dispatches within Latvia weighing up to 1.5 kg will cost EUR 5, to other country of the European Union or to Russia, Belarus, or Ukraine — EUR 40, and to other countries of the world — EUR 60. The new charge includes value added tax (VAT).

7. Premises of ABLV representative office in Moscow have become more comfortable and attractive

ABLV group representative office in Moscow is our major representative office abroad and plays a great role in cooperation with Russian clients. It is also one of the busiest representative offices, as about 50 visitors come to it daily.

Although we liked the office location, the layout required considerable reconstruction — there were not enough meeting rooms, no reception of due quality, as well as open-space layout of workplaces needed to be arranged.

Large-scale reconstruction project was started in the second half of 2015 in cooperation with the reliable architect bureau well known to us — H2E, which also designed the interior of the bank’s offices in Riga. The investments in reconstruction amounted to about EUR 425 thousand, and in December this year Moscow representative office opened its doors to welcome visitors to renovated premises that meet ABLV group corporate style.

Merry Christmas and happy New Year!

Ilmārs Jargans
Head of Public Relations Department
+371 6777 5296