Petrie has been at Helaba for almost 35 years, latterly as head of primary markets. He told GlobalCapital that his last days at the bank will be in December. He has left a mark across capital markets, but the deepest impression will be left on Europe’s largest private debt market, the Schuldscheine.
“I haven’t known anyone more outstanding in the industry,” said a former colleague, who is still a big figure in German corporate banking, about Petrie. “You can’t find a person more instrumental in the founding and success of the Schuldschein market.”
Helaba has yet to name a successor, though it will likely be someone from within the bank.
As head of credit trading in the mid-1990s, Petrie noticed something. A Schuldschein — an obscure bilateral loan structure documented under German law, which had been issued for centuries by Germany’s financial institutions, sovereigns, sub-sovereigns and agencies — would fit neatly into company funding strategies.
At the time, according to Petrie, the syndicated loan market was in transition.
“Corporates were changing their philosophy with relationship banks,” he said. “[Back in the early ’90s] there were many more banks in a syndicate — my first deal, for example, was with 45 banks. There were buckets of opportunistic banks, with only €5m or so tickets. But this was changing.”
Companies, driven in part by an increasing desire from lenders for their ancillary business, were whittling down their banking groups and leaving the less important ones out in the cold. Schuldscheine were thought to be an interesting funding solution. They were less burdensome to document than bonds and did not carry investor expectations of cross-selling, as with loans.
“All of us were coming from the bond and syndicated loan side,” said Petrie. “We found the Schuldschein as an ideal instrument to cover core clients: second, and some first, league German corporates.”
The first corporate Schuldschein issue was a DM50m deal from home products manufacturer Benkiser in 1996, marketed to a clutch of local German banks. Then came pharmaceutical firm Phoenix Pharmahandel, followed by car rental firm Sixt.
Petrie had some help in developing the market from competitors at BayernLB, LBBW and Commerzbank among others, who helped expand the investor group and attract new companies in the early years. But for the first decade of the product’s existence, it was a regional affair. In the first few years, there were only one or two deals per quarter.
Crisis growth
The serious turning point, as Petrie sees it, was during the financial crisis of 2008.
“When bond markets were disturbed and there were no support mechanisms from central banks, a lot of large clients like BMW, Daimler, Telekom and Swisscom wanted to show market capabilities and moved to the Schuldscheine,” he said.
The subsequent eurozone crisis helped to further raise the market’s profile to among European corporates as they looked for diverse funding sources.
During the coronavirus crisis the product has been less visible. As central banks piled money into the bond markets, the Schuldschein equivalent has found it hard to compete on price and speed of execution. But Petrie remains confident: “Has this disturbed the product? Not in the long term. The larger names are quieter, but they want to stay in the Schuldschein market.”
The Schuldschein now stands as a pan-European product, with roughly €25bn-€27bn of deal flow each year in recent times. Having expanded beyond the German speaking region, to Benelux, the Nordics, France and now Spain and Italy, Petrie believes there is plenty more business to bed one across the continent.
Though he was on the Schuldschein market’s first roadshow to China, with Lufthansa, he thinks that Europe should remain its focus. “There is a lot more opportunity in Italy, Belgium and Norway, for example,” he said.
In the past few years, Petrie has focused on two things to improve the market’s accessibility: documentation and digitalisation. Working closely with independent company VC Trade, Petrie helped the startup gain profile in the market for its new issue platform, which has become the market leader with more than 600 investors using it. That is, for all intents and purposes, all Schulschein buyers, as well as 10 arranging banks, including BayernLB, Commerzbank, DZ Bank and Helaba.
Petrie has devoted time working with a number of key stakeholders, including Linklaters’ Neil Weiand and the Loan Market Association, on standardised documentation over the past few years, in the hope of making the market more accessible for first time issuers. The new documents were first produced at the end of 2018, which puts the market in good stead.
“As an instrument, in principle we will be on a growth path,” said Petrie. “We have everything ready, standardised documents which are legally binding across the world, digital instruments to execute the deals and enough investment grade companies in Europe.”