IGTA Journal - Summer 2018

It is already very old in the United States, where the US PP represents a significant part of the financing of non-financial companies, this proportion tending however to decrease since the 1990s in favour of public issues. A quarter of a century ago, the outstanding amount of bonds issued by these companies ($ 300 billion) represented no less than 60% of bank credit stock and nearly 40% of that of public issues; the amounts raised through private placements have even exceeded those of the public market in 1988 and 1989. In 2017, the total amount reached $ 68 billion, or 60 billion euros at the average exchange rate of the year, knowing this data includes infrastructure funding. It is in Europe that its progression has been the most spectacular in recent years. With the German Schuldschein, old also but until recently rather destined for local Authorities (27 billion euros in loans in 2017), and with the Euro PP, the latest, formalized in the early 2010s (5 billion in 2017). One or the other: a luxury "The different private placements are not in competition but are additional sources of funding that meet the specific needs and risk profiles of issuers and investors," notes a December 2017 study (Identifying market and regulatory obstacles to development of private placement of debt in the EU) by the Boston Consulting Group and Linklaters on behalf of the European Commission. For issuers with an honourable credit quality, the fact of being able to solicit one or the other of these markets according to their priorities constitutes a luxury. "There is not, in itself, a device better than another," said Floriano Ascensao, managing director at Crédit Agricole CIB, which is also integrated by many issuers who call for tenders from arrangers without displaying preference for any of the devices. US PP, Schuldschein and Euro PP, however, are not equipped with all the virtues. They even have their Achilles heels. The US PP is for example very expensive for companies (they represent only 20% of issuers) not getting the best ratings, because the capital charge for US insurance companies becomes dissuasive below which corresponds to the investment grade category. American institutional investors, moreover, are very suspicious when it comes, for example, to the geographic scope of the issuer: "We ran into the cultural framework," recalls the head of financing a company present in Russia who had soaked a foot in the Potomac to gauge the temperature. Euro PP lacks, among other things, maturities that are as far apart as those of the Yankee PP. As for the Schuldschein, the complaints which are most commonly addressed to it relate to the applicable law ("The Schuldschein is not in itself a bad device, but it has one default: not the fact that the language of the contract is the German, as we often hear, but that litigation is under German law”, says Cherifa Hemadou, director of financing and treasury of Virbac, who borrowed 250 million euros in early 2015 and whose one of the IGTA eJournal | Summer 2018 | 7