FINLAND - Finnish pension funds and insurers will be the primary investors in a €130m hybrid bond issued by Finnish real estate firm Sponda, according to chief executive Kari Inkinen.

The firm - which has three large domestic pension funds as major shareholders - issued the bond as a means of raising capital for its expansion into the Russian market without diluting the value of existing shareholdings.

"It's an equity bond - effectively a way to avoid issuing new shares," said Inkinen.

The bond, which has a coupon rate of 8.75% and was issued by Nordea Markets, has no maturity and will be treated as equity. Sponda intends to list the bond by the end of September.

Inkinen said the bond would improve the firm's equity ratio towards its 33% target.

"It's the normal course of business. We have developments that require new capital, and it will help fund our expansion into Russia," he said.

With €143m already invested in the Russian market, Sponda plans to invest up to €400m in the market by the end of 2009.

Inkinen did not comment on planned measures to raise the rest of the capital needed to finance the firm's domestic developments and Russian investments this year, although a statement to the Helsinki stock exchange indicated short-term plans to sell individual properties.

Sponda's existing assets are valued at €2.7bn.

In addition to the 34% equity held by the Finnish state, Sponda's shareholders include Varma Mutual pension company (1.8%), the Finnish State Pension Fund (0.63%), Ilmarinen pension firm (0.42%), Yleisradio Pension Fund (0.31%) and Etera pension firm (0.29%).