Conference Magazine - GoingPublic.de - Deutsches Eigenkapitalforum

Bond Issuance
Corporate financing via bonds for SMEs
The capital market as the “new” source of financing
on the debt capital side
Solvency II and Basel III are keywords that are prompting
many companies to reconsider their corporate financing.
These regulatory measures pose strategic questions such
as: what is the right financing mix of debt and equity if companies
are to continue benefiting from low overall cost of
capital in the future? Which capital sources will continue to
be available in the long term? What advantages does the
capital market offer? Is this financing source a good fit for
my company, and how can I prepare for this step? One of
the decisive factors is how well companies prepare for the
duties of the regulated capital market.
The typical profile of an SME bond
The current and expected changes to classic bank financing
impact upon SMEs in particular. As a result, these companies
are now investigating bond financing through the
capital market. In Germany, a relatively new SME bond market
is taking shape for these companies. Since 2010, five
stock exchanges have generated new segments and a total
issue volume of more than EUR 2.4 billion. By mid-2012,
more than 44 companies had used this financing channel.
Five companies have even placed more than one issue,
making multiple use of the bond market. The 50 issues to
date are characterised by the following typical bond profile:
Terms and conditions
► Issue volume: min. EUR 10 million, max. EUR 200 million,
avg. EUR 54 million
Figure 1: Annual revenue in year prior to issue
Number
16
14
12
10
8
6
4
2
0
12
Less than
50m
Source: Ernst & Young
8
50m to
100m
Page 42 Deutsches Eigenkapitalforum 2012
4
100m to
150m
7
150m to
200m
14
Greater than
200m
Michael Oppermann has worked at
Ernst & Young since 1986. He has 25
years of experience in auditing IFRS
and US GAAP financial statements
and extensive experience in running
projects for conversion to IFRS and
US GAAP. He is Head of Financial Accounting
and Advisory Services in
Germany, Switzerland and Austria.
Michael Oppermann, Partner, Head of
Financial Accounting and Advisory Services,
Ernst & Young
► Coupon rate: For issue at issue price (usually 100%):
min. 5.9%, max. 11.5%, mean: 7.4% p.a.
► Maturity: Range of three to seven years, generally five years
► Rating: Mostly in the range from BB to BBB+
Profile
► Capital market experience: 38% of the companies already
have shares listed on the stock exchange. 62% of those
issuing bonds are newcomers to the stock exchange
► Accounting: 57% pursuant to German GAAP (“Grundsätze
ordnungsmäßiger Buchführung”) and 43% pursuant
to IFRS
► Legal form: 56% German stock corporations, 32% German
limited liability companies and 12% German limited
partnerships
► Industries: Generally open to all. The focus is currently
on the logistics, energy, automotive and consumer sectors.
Well-known brand names are an advantage when it
comes to placing bonds
Placement
► Placement: Own issues predominate in terms of number
and volume, choice of five stock exchanges in Germany
► Cost: 4.2% to 4.8% of emission volume
► Use of funds: 71% new financing and 29% refinancing
► Rating form: 77% corporate rating and 9% bond rating
(covenants can improve rating) dominate