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3 questions to smart minds

Mittelstandsanleihen are booming — who are they suitable for

For this 3 questions to C. Schütz

STUTTGART STOCK EXCHANGE
Photo: C. Schütz | STUTTGART EXCHANGE
1. Octo­ber 2013

With bank loans beco­ming scarce, more and more SMEs are tapping the capi­tal market. A wave of bonds is rolling onto the market again this fall — with an inte­rest rate promise of eight percent. This sounds temp­ting, but it invol­ves certain risks. For whom are Mittel­stand bonds really suitable?


For this 3 ques­ti­ons to Mana­ging Direc­tor, Head of Primary Market Group Börse Stuttgart

1. Listed SME bonds have only been around for three years. How many have been issued to date and for which compa­nies are they suitable?

The Stutt­gart Stock Exch­ange laun­ched the BondM trading segment in May 2010 with the aim of giving smal­ler compa­nies access to the capi­tal market and thus to alter­na­tive lenders by issuing their own bonds. This path was previously reser­ved for large medium-sized compa­nies and corporations.

For the first time, not only insti­tu­tio­nal inves­tors but also asset mana­gers, family offices and expe­ri­en­ced inves­tors were able to subscribe to bonds at the issue price and thus at the issue yield via the subscrip­tion box crea­ted for this purpose. With this initia­tive, the Stutt­gart Stock Exch­ange pionee­red an idea that has since been taken up many times by other German stock exch­an­ges. More than 100 bonds with a total nomi­nal value of almost 4 billion euros have now been issued and listed on the SME segments of the German stock exchanges.

There is no uniform issuer profile. The German SME sector is far too hete­ro­ge­neous for that. The list of issuers includes not only tradi­tio­nal indus­trial SMEs from a wide range of sectors, but also agri­cul­tu­ral compa­nies, trading compa­nies, bran­ded compa­nies and real estate companies.

2. Could it be said that bonds have repla­ced private equity solu­ti­ons as a finan­cing instrument?

The SME bond repres­ents an alter­na­tive finan­cing option for long-term debt capi­tal procu­re­ment. This will conti­nue to be used by medium-sized compa­nies in the future. It is neither a substi­tute nor a repla­ce­ment for equity. The Mittel­stands­an­leihe will also only conti­nue to deve­lop successfully if it basi­cally follows the rules that apply to other debt capi­tal solu­ti­ons. Turning the Mittel­stands­an­leihe into the new mezza­nine would be the end of a good idea. 

3. Are Mittel­stands­an­lei­hen suita­ble for all inves­tors? How can inves­tors find out about the credit­wort­hi­ness of a bond? Why is there (still) no rating for bonds?

Mittel­stands­an­lei­hen are certainly not suita­ble for all inves­tors. Inves­tors should consider very carefully what level of risk they wish to take. In most cases, Mittel­stands­an­lei­hen are also only used as port­fo­lio addi­ti­ons. In the mean­time, there are also actively mana­ged and risk-diver­si­fied funds on Mittel­stand bonds in the market.

In order to deal sensi­tively with risks, infor­ma­tion gathe­ring and a good know­ledge of the market and products are indis­pensable. Inves­tors can, and dili­gently do, take advan­tage of the exch­an­ges’ exten­sive infor­ma­tion offe­rings with detailed pages on secu­ri­ties. Rating certi­fi­ca­tes and rating summa­ries can also be viewed, but often actually only for issuer ratings. The rule­books of the stock exch­an­ges do not curr­ently make bond ratings manda­tory, with the excep­tion of colla­te­ra­li­zed bonds. It would be welcome if more bond ratings were shown in the future. Howe­ver, issuers usually shy away from the addi­tio­nal costs.

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