The private placements market has boomed since the crash – but this has been restricted to domestic markets. Now, this looks set to change.
The International Capital Market Association’s (ICMA) Pan-European Private Placement Working Group (PEPP) has completed a set of guidelines that aim to help companies develop a best practice model that will enable cross-border placements.
Called the Pan-European Corporate Private Placement Market Guide, this sets out to provide a voluntary framework for the common market standards that will be crucial in creating a pan-European operation. In particular, the guide is aimed at mid-sized companies in the EU that are looking to secure medium to long-term finance, many of which have historically looked to the US private placement market instead.
Areas covered by the guide include broadening access to cost-effective funding opportunities, lowering operation costs and expanding the European investor base for private placement transactions.
The PEPP’s approach also aligns with the European Commission’s (EC) goal of nurturing a capital markets union.
With 200,000 mid-sized companies in the EU looking to move away from traditional bank loans, demand for alternative sources of funding, including private placements, seems set to soar. Recent research by Standard & Poor’s suggests that, between now and 2018, mid-sized companies will need to refinance €2.7 trillion of debt – while banks remain reluctant to increase long term lending. Many companies see the private placement market as a stepping stone to entering the listed bond market, while others view it as a viable alternative in its own right.
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