Conference Magazine - GoingPublic.de - Deutsches Eigenkapitalforum

Bond Issuance
“A success model with weaknesses, but a
success model nonetheless”
Interview with Frank Heun and Arne Laarveld, equinet Bank AG,
and Mark Hoffmann, Robus Capital Management
equinet Bank AG is one of the most
active participants in “SME bonds”.
Conference Magazine spoke to
Frank Heun and Arne Laarveld, from
equinet, as well as Mark Hoffmann,
of Robus Capital Management,
about previous experiences and improvement
potential on the relatively
new market for capital borrowed by
small and medium enterprises.
Conference Magazine: Gentlemen,
what is your current stock-take on
the market for SME bonds?
Hoffmann: The supply side dropped extremely rapidly over
the summer, as it did on capital markets elsewhere. The situation
was then totally different in September. What can
easily be established is that brand names apparently work
well across the board. Not everything can be placed fully,
which is a bit like the opposite of an accolade for us.
Laarveld: After more than two years and over 50 issues, the
instrument can be referred to as established. The current
trend shows that issuers were on the starting blocks, just
waiting for the summer to end and for as little instability as
possible with regard to economic and political grounds. Just
like investors.
Heun: Even if the topic of SME bonds is not fully applauded in
public, it can without a doubt be called a success model; it may
have its weaknesses, but it is a success model nonetheless.
Conference Magazine: What are investors paying attention
to, then? It can’t just be the brand name alone.
Hoffmann: The fact that brand names more or less sell
themselves is a sign of market inefficiency or non-transparency
for me, rather than an indicator of a success
model. Surely this cannot be the only pillar of placement.
After all, there are not many regional brewers or spirit producers
that representative for a typical German SMEs.
Heun: Naturally, it is also an indicator that the market for
SME bonds is still new and that it does not yet work in a
completely professional or institutional manner.
Conference Magazine: Is the SME bond actually as im -
portant a form of financing as it often made out to be, or
Page 46 Deutsches Eigenkapitalforum 2012
From left to right: Falko Bozicevic, Frank Heun, Arne Laarveld and Mark Hoffmann
were the issuers, possibly to a certain extent, simply unable
to obtain adequate funding elsewhere?
Laarveld: Especially with the first SME bonds you sometimes
had the impression that a bond was simply more convenient
than tedious negotiations with house banks.
Issuers did not even make a secret of this. The topic of
covenants/credit clauses was almost entirely omitted. This
situation has clearly developed over the last two years.
Heun: Absolutely. It is simply becoming more expensive for
banks to grant loans, there is no way around this. As a
result, SME bonds have found their role, both from en
economic as well as from an issuers point of view. However,
what we must move away from is saying that a particular
bond is of higher or lower quality than another. From a systematic
perspective, this is somehow inaccurately. What
would be correct is to demand that each bond has an adequate
risk-return profile.
Hoffmann: We don’t have a problem with this as investors.
However, one thing that is definite is that banks must tighten
their belts. We therefore completely understand where
issuers are coming from.
Conference Magazine: Is there potential for improvement
with issuers?
Heun: Generally, management must be clear about getting
external investors on board, and in some cases, doing so for
the first time. This means that in future, the company will
communicate with the public. Simply taking people’s money
and reporting back in five years’ time will not work or bring
success. In fact, I could provide some examples where there