Kuntarahoitus Oyj - Company Announcement

Board of Directors of Municipality Finance Plc proposes a share issue

BOARD OF DIRECTORS OF MUNICIPALITY FINANCE PLC PROPOSES A SHARE ISSUE


The Board of Directors of Municipality Finance Plc has decided, at their
meeting on 3 February 2009, to propose a share issue during the first half of
2009 at the 12 March 2009 annual general meeting. The objective of the issue is
to raise at least MEUR 30 in new capital. The share subscription period is to
be started as soon as possible after the annual general meeting. 

The share issue will be primarily targeted to the municipal sector. In
addition, the Finnish government has decided to participate in the issue with a
maximum investment of MEUR 20. However, the government's ownership of shares
subscribed for in the share issue is not to exceed 70 percent. The funds to be
acquired in the planned share issue will support the strong growth in the
company's business volume in the next few years. 

The significance as the primary source of funding for municipalities is
increased 

Municipality Finance's customers are municipalities, municipal federations,
municipality-controlled entities, and non-profit associations identified by the
Central Governmental entities and the Housing Finance and Development Centre of
Finland (ARA). The company is the single greatest operator in its customer
segment and is, therefore, a very important actor in municipal financing. The
excellent credit rating of the company and its active operations in capital
markets have ensured that the lending for municipalities has been handled
reliably, cost-effectively, and competitively. 

Once the general market conditions changed during 2008, demand for Municipality
Finance's lending has further increased. Other financial institutions have
significantly reduced their activity levels in the municipal sector, at the
same time as the need for funding in municipalities has increased. The
intention of Municipality Finance is to meet the increased need in the
municipal sector and to be able to handle municipalities' financial needs with
competitive terms in the future as well. 

The planned share issue allows a significant increase in lending by
Municipality Finance during the next few years, thus supporting, among other
things, social housing construction projects and employment in the construction
industry in Finland. Municipality Finance sees strengthening its capital
structure using a share issue as important. This ensures the excellent credit
rating and, therefore, low funding costs during a strong growth phase. In
addition, the company's future position in the funding market is improved by
the Finnish government becoming a significant shareholder. "Municipality Finance is currently the most important, and practically the
only, funding provider in the municipal sector. Securing the capital adequacy
of the funding system of municipalities is so important for Finnish
municipalities' finances that the Board of Directors of Municipality Finances
fully supports the strengthening of the capital structure of the company and
hopes that a large number of municipalities will participate in the project.
The financial crisis affects everyone, thus ensuring that funding for the
municipalities is of utmost importance", states Asko Koskinen, Chairman of the
Board of Directors of Municipality Finance. "We have already enquired about the willingness of some of our largest
shareholders to strengthen the company's balance sheet with a greater
contribution. This initiative, which we feel is important, has received
positive feedback from them", says Pekka Averio, CEO of Municipality Finance. "The government is going to participate in Municipality Finance's share issue
with an investment of MEUR 20. The intention of the investment is to secure the
increasing funding for rental housing construction subsidised by the
government. Investing in interest-subsidised housing construction is
particularly important for employment right now, says Jan Vapaavuori, Minister
of Housing. "Resources becoming available from private housing production can
be directed to government-subsidised rental unit production. There is plenty of
demand in the rental unit market and the current economic downturn has only
increased it. Levelling the economic downturn threatening the construction
industry is a responsibility shared by both the government and municipalities",
continues Vapaavuori. 





Municipality Finance Plc

Further information: 
Pekka Averio, CEO, +358 (0)9 6803 6211, +358 (0)500 406 856
Asko Koskinen, Chairman of the Board, +358 (0)50 517 5471


Municipality Finance Plc is a local government credit institution owned by
Finnish municipalities and the Local Government Pensions Institution and is the
parent company of the Municipal Finance Group. The company's mission is to
ensure top-value financial services for the municipal sector, to be efficient
and to grow profitably. The company's balance sheet totalled EUR 9,609 million
on June 30, 2008. The company offers market-based funding to municipalities and
municipal federations, to municipality-controlled entities and non-profit
housing corporations. The company's funding, which is guaranteed by the
Municipal Guarantee Board, is obtained from international capital markets and
domestic investors. Funding provided by the company goes into social and
non-profit service projects, such as schools, housing and hospitals. The Group
includes Financial Advisory Services Inspira Ltd, which offers financial
advisory services for investments, financial and asset arrangements, asset
management and various analysis services.

Attachments:

osakeantitiedote 04022009 engl.pdf