Using a corporate bond to finance a residential development: the Novus case
For companies financing a major project, there is rarely a single source of capital that does everything. Equity, bank debt and bonds can each play a different role in building an efficient financing structure.
A corporate bond can provide an additional source of capital alongside equity and bank financing, particularly when a company needs to fund a defined project or investment.
For Novus Asset Management, a real estate investment fund focused on residential development, a bond formed part of the financing structure for its Bukčiai residential development in Vilnius, Lithuania.
The company raised €7.7 million in equity and secured bank financing, while a €2.855 million bond covered part of the remaining funding requirement. The bond was issued in collaboration with Bondea, with Axiology providing the regulated infrastructure for registering and safekeeping the securities.
Why a bond formed part of the financing strategy
Novus did not use the bond to replace equity or bank financing. Instead, the €2.9 million bond formed one part of a broader capital structure for the development.
For businesses, this can make bonds particularly relevant when existing sources of financing do not cover the full capital requirement. Equity can provide the company's own capital, while bank financing can cover part of the project. A bond can supply an additional source of debt capital to help finance the remaining requirement.
In Novus' case, the financing structure combined €7.7 million of equity, bank financing and a €2.9 million bond.
Financing the Bukčiai development
The €2.9 million bond is being used to finance the first stage of Bukčiai, a residential development in Vilnius.
“The financing will support the construction and development of the first stage, which is currently progressing according to schedule. We are also seeing strong interest from potential buyers, with a significant number of advance reservations already secured. We expect to complete the first stage in Q3 2027, with the full “Bukčiai” development planned for completion in 2029,” comments Leonardas Diržys, CEO of Novus Asset Management.
For Novus, bond financing therefore forms part of a broader financing strategy supporting a clearly defined development project.
From bond issuance to registered ownership
Once investors purchased the bonds, the securities needed to be registered and the ownership of each bondholder recorded and maintained. Axiology provided the regulated DLT infrastructure for this part of the securities lifecycle.
On the same day it received the required information, the bond was registered on the infrastructure, with investor accounts and ownership records established for the bondholders. Axiology will continue to safekeep the securities and maintain the relevant records until maturity.
For an issuer, this means the financing process does not end when investors subscribe to the bond. The securities also need to be properly registered, recorded and maintained throughout their lifecycle.
What this means for companies looking to raise capital
A bond can be one component of a broader financing strategy. Companies do not necessarily need to choose between equity, bank financing and bonds. Depending on the project and financing requirements, these sources can be combined.
The Novus transaction illustrates three things about using bond financing to raise capital:
1. Bonds can finance a defined project.
The €2.9 million bond was raised to support the first stage of the Bukčiai residential development.
2. Bond financing can complement existing sources of capital.
Novus combined equity, bank financing and bond financing rather than relying on a single source.
3. Issuing a bond involves more than raising capital.
Once investors subscribe, ownership must be registered and maintained, securities accounts need to be managed and the securities need to be safely held through their lifecycle.
What does a company need to issue a bond?
A company considering bond financing needs to define the key terms of the bond, prepare the required documentation and work with the relevant regulated intermediaries and infrastructure providers to bring the issuance to market.
Once investors subscribe, the securities need to be registered, investor ownership recorded and the bonds safekept throughout their lifecycle. For a tokenised bond, regulated DLT infrastructure can support these processes as part of the securities' lifecycle.
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