Roundtable: Schuldschein market strives to stay special as appeal broadens

The Schuldschein is breaking new ground. The centuries-old German promissory note is no longer just a product for German companies to issue and regional savings banks to invest in. Schuldscheine, half way between bonds and loans, have attracted foreign issuers, foreign investors and even foreign arrangers in recent months, and the limits of the market are truly being expanded. Meanwhile, European policy makers have picked private placements as a favoured source of funding for Europe’s SMEs. That could be great for the Schuldschein, or it could pose a threat, if attempts are made to harmonise PP formats across Europe, and some of its quirky attractions, such as light documentation, are squeezed out. Meanwhile, the product is basking in demand so enthusiastic that issuers can often obtain better terms than they can get in the public bond market or from banks. Issuance in 2015 is nearing €20bn, close to a record, helped by huge deals like the €2.2bn acquisition financing by ZF Friedrichshafen. So far, most issuers are of high credit quality, but there are rumbling debates about whether and how the market should be opened to weaker issuers. GlobalCapital gathered issuers, investors and investment bankers in Frankfurt in November, to discuss how to safeguard and promote the future of this bustling market.