Apollo Group’s Bond Offering Attracts Baltic Investors
The Baltic capital market is witnessing increased activity as companies turn to public bond issues for development financing. Entertainment and catering group Apollo Group is the latest to explore this avenue, offering investors a unique opportunity to directly observe the performance of the businesses they invest in through brands like Apollo Kino and Lido.
Attractiveness for First-Time Bond Investors
Andrejs Martinov, chairman of the board at investment management company INVL, suggests Apollo Group’s bond issue is particularly appealing to local investors, especially those new to bond investing. “This offer gives an opportunity to receive a fixed income of ~7% from the invested money (if the advantages of the investment account are used), at the same time it is easy for investors to understand the business that provides this income – cinemas, restaurants and other everyday services. It also allows you to practically observe how the company’s products are doing on the market,” explains Martinov.
Growth Potential and Risks
Martinov highlights that the investment aligns with a positive outlook on the Baltic economy and stable consumer spending. However, he also cautions about potential risks. “Apollo Group consists of several companies, and difficulties in one of them can affect the financial position of the entire group. In this case, the bonds are not secured by a specific asset, and the company’s operation can be affected by competition in the entertainment and catering segment.” He notes that Apollo Group has established financial parameters (covenants) which are currently being met.
Baltic Bonds: A Medium-Yield Opportunity
Voldemārs Strupka, an investment expert at Signet Bank, emphasizes the attractiveness of Baltic bonds as a “light high-yield” segment with relatively stable companies. He views Apollo Group’s bonds as a typical medium-yield corporate loan, offering a higher coupon rate than those available in the Eurozone in exchange for lower liquidity.
Strupka points to the underdeveloped nature of the entertainment sector in the Baltics, suggesting potential for growth driven by rising wages, urbanization, and the “experience economy.” He also notes the fragmented market, creating opportunities for larger operators like Apollo Group. However, he cautions that inflationary pressures, higher energy prices, and potential stagflation could negatively impact discretionary spending, posing a cyclical risk to the entertainment sector.
Supporting Local Development
Karīna Kulberga, head of Mintos’ wealthy client segment, financier, and investor, emphasizes the positive impact of the bond issue on local development. “As an investor from Latvia, I am pleased to see that the bond issue is also intended for the construction of the central distribution center of the very well-known Lido brand. This means new jobs and support for the local economy, whereas strengthening the development of the brand in the Baltics and Finland,” says Kulberga.
Financial Stability and Diversification
Kulberga also highlights Apollo Group’s financial structure, noting that its 26 years of growth have been largely self-financed. She points out that the bond issue represents the company’s first external fixed debt, which she views favorably as it indicates a lack of existing significant obligations. She suggests the investment can serve as a diversification tool for investors with portfolios concentrated in foreign markets.
Bond Offering Details
Residents of Latvia can apply to purchase Apollo Group bonds until March 16. The offer is open to both private and institutional investors across the Baltics, with a minimum investment of 500 euros. The bonds have a five-year term and an annual interest rate of 7%. Apollo Group serves over one million customers in the Baltics through its cinemas, bookstores, and restaurants.