Demand for Bonds Increases Among Growth Companies

An increasing number of growth companies are gaining access to debt financing outside the traditional banking sector, whereas previously, only the largest companies were able to issue bonds.

"We are noticing that this change is happening faster than before, and we believe that we can gain market share in the coming years", says Johan Karlsson, Senior Project Manager at Vinga Corporate Finance.

Through Vinga, the bond market is opening up for growth companies as well. For at least a decade, Vinga has observed that access to traditional bank financing has become increasingly difficult for these companies. Meanwhile, larger corporations have been able to issue large bonds at favorable terms, where institutional takers have invested at low interest rates for many years.

Access to capital and the right combination of financing has become even more important in times of economic uncertainty.

"Access to venture capital still exists, but the expectation often differs. It's not always that capital and companies are able to match right now", says Johan Karlsson.

He highlights that there are still many industries that are performing well in the current economic climate.

"That's where we're primarily looking for new issuers now."

Green Financing Trend
The bond market is also experiencing an upsurge in green bonds: the demand for this financing vehicle continues to grow. Vinga recently coordinated and issued a bond for Regenergy Frövi, outside Örebro in Sweden.

The proceeds from the bond are used to build an eleven-hectare greenhouse for year-round tomato cultivation. During the colder parts of the year, this is made possible through waste heat from a nearby paper mill. This smart solution enables a large part of Sweden's tomato consumption to be produced locally. When a lower proportion of tomatoes are imported, emissions from transportation, among other things, are reduced.

"This investment has a clear social benefit and provides a good return for investors in the bond. The company obtains additional cash flows and can hire more people. It's a win-win for all involved."

Close Collaboration with Issuers
"We have ambitious growth targets that we plan to achieve by raising capital for companies in industries and niches we have not catered to before. We actively work to reach out to, and finance, companies with growth ambitions. Many do reach out to us directly, but the bulk of the work is still done by actively seeking out companies that need financing."

This can be done in several ways, both through pure sales calls, through the network that has been built up, to participating in trade fairs or organizing our own capital market days.

High Interest Rates Require New Solutions
In an uncertain world with higher interest rates, finding financing is a challenge as most lenders are restrictive.

"Vinga is still raising capital and we are still looking for new issuers. So instead of just seeing challenges ahead, contact us and we will see if we can help. We are skilled at finding solutions that suit our issuers."

Recently, we have heard from central banks and chief economists that there could be "a longer period of higher interest rates." How does this affect your offerings to customers?

"Most of our bonds have a floating rate component, so it partially self-adjusts when the base rate has gone up. Since we are active in the high-yield space, the margin above the variable component is relatively high and we have seen it creep upward lately, capital is more expensive", says Johan Karlsson.