Introduction
M-Bonds for Mid-Sized Corporates
in The Netherlands?
November 2012
Rob Naber
Lisette Overmars
1
I.
INTRODUCTION
II. DEBT CAPITAL MARKET DEVELOPMENTS
III. FUNDING ALTERNATIVES
IV. MITTELSTAND BONDS
V. SCHULDSCHEINE
VI. DISCUSSION
2
I. INTRODUCTION ZANDERS
3
FIRM
OVERVIEW
“Zanders believes that finance
solutions should be advised in an
independent, innovative and
entrepreneurial manner based on
thought leadership and
conforming to the constantly
changing demands of the market”
•
Zanders Treasury & Finance Solutions was
founded in 1994
•
Independently, entrepreneurial and innovative
advisory firm
•
Specialized in Treasury Management, Risk
Management and Corporate Finance
•
Corporates, Public Sector and Financial
Institutions
•
Over 150 professionals
•
Advisory, interim, outsourcing and transactions
services
•
Located in Bussum (NL), Brussels (BE), London
(UK) and Zurich (CH)
•
Global leading advisory firm in its area of
expertise
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II. DEBT CAPITAL MARKET DEVELOPMENTS
5
DEBT
CAPITAL MARKET DEVELOPMENTS
Financing yourself in a (post) Crisis landscape?
•
Surety of funding is lacking
•
Renewed focus on credit risk due to economic downturn and increased sovereign risk
•
Liquidity premiums are increasing
•
Higher pricing and tighter borrowing covenants
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DEBT
CAPITAL MARKET DEVELOPMENTS
Implications of the Basel III banking framework
•
Shift of focus: from asset side to liability side
•
Quality and size of banks’ core capital must increase, which results in higher capital
reserves
•
Banks must disclose leverage ratios as of 2013
•
Also capital requirements for derivatives might increase, which leads to more expensive
products
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BALANCE
SHEET MANAGEMENT
-
CORPORATE ‘DILEMMA’
Shareholders Perspective
Liquidity Management
• Maximizing (short term) corporate value
• Secure (day to day) corporate funding
• Ownership dilution versus subordination
• Focus on sustainable balance sheet
• Focus on ROE
• Cash flow perspective!
• Costs of principal – agent problem
• Focus on solvency
• Costs of financial distress
• Invest in flexibility
Liquidity Management
Shareholders’ value
How to deal with declining lending by banks?
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III. FUNDING
ALTERNATIVES
9
DEBT
CAPITAL MARKET INSTRUMENTS
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IV. MITTELSTAND
BONDS
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M-BONDS
•
First M-Bond issue in September 2010 in Stuttgart
•
M-Bonds market approx. EUR 2.8 billion – 55 Bonds
•
Issues range between the EUR 10 and 75 million (average EUR 50 million)
•
Tenor is typically 5 years
•
Coupon between 7-9%
•
Denominations of M-Bonds are typically EUR 1,000.
•
Listing on all 5 exchanges in Germany (Stuttgart, Frankfurt, Hamburg-Hanover,
Dusseldorf)
•
Credit rating by 3 German certified credit rating agencies (majority between BBB+ and
BB-)
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M-BONDS - ISSUERS
•
Mostly (>75%) privately owned companies
•
Annual turnover between EUR 26 million and EUR 400 million
•
Branches diverse, although concentration:
• Energy (mainly renewable energy) - 25%
• Real estate – 19%
• Automotive - 14%
•
Interest coverage ratios are relatively low:
• < 1x - 38%
• 1-2x - 33%
• 2-3x - 24%
• > 3x - 5%
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Size of M bonds in Milions
40
35
30
25
20
Number of M bonds
15
10
5
0
≤25
25< ≥ 50
50< ≥ 75
75< ≥ 100
100< ≥ 150
150 < ≥ 200
≥ 200
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Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
PER
Jan-12
Dec-11
M-BONDS
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
OF ISSUED
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
NUMBER
MONTH
7
60
6
50
5
40
4
30
3
1
0
Number of issued M-Bonds per month
Number of issued M-Bonds cummulative
2
20
10
0
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M-
BONDS
- INVESTORS
•
Started with mainly retail investors
•
Currently also institutional investors, but often for short holding period:
•

Saving banks

Private banks

Pension funds

Insurance companies
Online Trading Platform
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V. SCHULDSCHEINE
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SCHULDSCHEINE
•
Schuldscheine loans are old, but recently on the rise
due to declining bank lending
•
In 2011 the Schuldscheine loan market totaled € 8
billion in volume
•
Issues typically range from € 10 million until € 500
million
•
German corporates typically raise larger amounts than
non-German companies
•
Flexible and can be tailor made
•
Typically held-to-maturity products
•
Bilateral agreement between a company and investor(s)
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SCHULDSCHEINE – ISSUERS
•
German public authorities represent the largest group of borrowers issuing
Schuldscheine
 Federal republic of Germany
 States
 Municipalities
•
Banks
•
Medium and Large German corporates (BMW, Siemens, Deutsche Telekom)
•
Non-German companies
•
Typical midcap corporates have revenues in between € 500 million and
€ 1 billion
•
In 2011 about 80 Schuldscheins with a total volume of € 8.6 billion were
issued
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SCHULDSCHEINE – ISSUERS
Examples of issues in 2012:
Altana AG
• Altana produces and develops high-quality, innovative products in the specialty
chemical business
• Deal volume: € 150 million in two tranches with maturities of 4 and 6 years
• Four times subscribed, transaction placed with about 100 (savings) banks and
institutional investors
Allgeier Holding AG
• Allgeier provides a broad portfolio of IT solutions and services
• Deal volume: € 70 million, partly used to refinance bank lines
• Transaction placed with 25 investors mainly (savings) banks
Wacker Neuson SE
• Wacker Neuson is a leading global manufacturer of light and compact equipment
• Deal Volume: € 120 million, more than twice oversubscribed
• Transaction placed with cooperative and savings banks, as well as institutional
investors within and beyond Europe
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SCHULDSCHEINE – INVESTORS
•
German and Austrian insurance companies
•
Regional landesbanken
•
Savings banks
•
Typically investors have a buy and hold strategy
•
Large network of small savings banks called ‘sparkasse’
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FEASIBILITY
•
•
FOR
DUCTH COMPANIES
Similarities German and NL market:
–
Same economic development over last 60 years
–
Export driven
–
Strong base of family-run companies (53% of GDP)1
–
Direction towards non-bank funding
Investors:
–
Institutional investor base different (Country wide network of a very large
amount of small retail savings banks (sparkasse) in Germany)
–
Retail investors
–
Supply chain investors
–
Less developed trading platform, but some initiatives in the Netherlands
1 Research University of Nyenrode and Accountants Baker Tilly&Berk (2011)
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WRAP
UP AND DISCUSSION
•
Need for alternative of bank debt for Dutch companies
•
M-Bonds and Schuldscheine in Germany =>
Solution for mid-sized companies in the Netherlands?
Discussion
1. Is obtaining a credit rating a pro or a con?
2. Who will be the investors in the Netherlands?
3. Can we build develop a Schuldschein or M-Bond market in The Netherlands?
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MITTELSTAND
•
BONDS
The regular bond issue will take ideally 90 days
•
10 days for selecting bank, legal etc
•
40 days for the memorandum and credit research
•
25 days for pre-sounding / roadshows
•
15 days final preparation and introduction
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MITTELSTAND
BONDS
•
E.g. Dürr 7,25% 2010-2015 offering (150m + 75m); done by Close Brothers Seydler
Bank. Dürr is a car manufaturer supplier of machinery
•
•
•
•
Started with preparations on 23-5-2010
Pre-sounding 6-9-2010
Memorandum ready 8-9-2010
Offering intended 13-9 till 24-9; however sold after two hours !!
– 3 times more market demand than the intended 150m
– Pricing started at 104, currently around 108
– Dec-10 an additional 75m was issued at 106
– Initially 61% to institutional investors, remainder retail
•
•
Note; institutionals normally sell off again to retail after a few weeks/a month
Info from CBSB
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MITTELSTAND
BONDS
•
E.g. Bastei Lübbe; 2011-2016 6,75%, 30m, rating BBB by Creditreform. Done by
Close Brother Seydler Bank. BL is an issuer of books
•
•
•
•
•
•
Start at 25-7-2011
Memorandum ready 29-9
Roadshow/sounding 3-10/7-10
Issuance at full 26-10 (in a difficult market at that time!)
72% to institutionals, remainder retail
Issuance at par, current price at 106
•
Note; rating by Creditreform is a small company rating and not fully comparable with
S&P/Moody’s
Info from CBSB
•
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Thank you for your attention
Zanders BV
Brinklaan 134
1404 GV Bussum
The Netherlands
T: +31 35 692 8989
Lisette Overmars
l.overmars@zanders.eu
Rob Naber
r.naber@zanders.eu
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