Corporate bonds in Czechia: when they also make sense for Slovak developers

Bank loans are a mainstay of development finance, but rarely cover everything. A company can fill the gap between equity and bank lending with corporate bond issues. The Czech market is well acquainted with corporate issues for both retail and qualified investors.

How a bond issue works

In simple terms, a company (the issuer) issues bonds with an agreed interest rate and maturity, and investors lend it money in return. The legal core consists of the terms of issue, which set out investor rights, interest, repayment and what happens if the project runs into difficulty.

The issuer’s obligations depend on how the issue is structured, from a small issue for a closed group of investors, through a public offer for which no prospectus is required thanks to a statutory exemption, to a public offer with a prospectus. Choosing the right regime is precisely where the greatest mistakes, and savings, can arise.

Why Slovak companies consider it

Two model scenarios: a Slovak developer forms a Czech project company (SPV) that also issues bonds to Czech investors. Alternatively, a Czech subsidiary of a Slovak group finances construction through a combination of a loan and bonds. Both require coordination of the Slovak and Czech sides: exactly the situation that one law firm operating in both countries is designed for.

What to watch for

1. Terms of issue are not a template. Poorly structured early repayment or security provisions can cause trouble when the project encounters its first difficulty.
2. Bond marketing has legal limits. Regulation determines what you may promise investors and how, not an agency’s creativity.
3. Bonds involve more than issuance. The issuer has obligations throughout the life of the issue, which should be mapped in advance.

We prepare bond issues in Czechia and provide the same service in Slovakia, including formation of the issuing company and related development project financing.