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The Pan-European Private Placement Working Group (PEPP Working Group) led by the International Capital Market Association (ICMA) has launched the Pan-European Corporate Private Placement Market Guide. The Guide sets out a voluntary framework for common market standards and best practices which are essential for the development of a Pan-European Private Placement market aimed at providing medium to long term finance to European mid-sized companies, in close alignment with the European Commission’s goal of bringing about a Capital Markets Union.
For many years, many mid-sized European companies have accessed the US Private Placement (USPP) market, making up a significant proportion of its nearly $60 billion of annual issuance. The popularity of private placements has accelerated since the onset of the financial crisis, with markets in countries such as France and Germany providing borrowers with a local solution. However, until now, there has been no pan-European private placement market. The demand for private placements is set to increase as the EU’s approximately 200,000 mid-sized companies look to diversify their sources of funding away from the traditional bank loan market, and view private placements both as an alternative and as an intermediate step towards the listed bond markets.
The Guide builds on existing practices and documents used in the European bond and loan markets, especially the Charter for Euro Private Placements developed by the Euro PP Working Group, a French financial industry initiative. It is expected that the Guide will:
Expand cost-effective funding opportunities for European mid-sized companies,
Grow the European investor base for private placement transactions, and
Lower operation costs by promoting the use of standardised PEPP transaction documentation (recently released by the Loan Market Association and the Euro PP Working Group).
The objective is that most European private placement transactions will eventually use the Guide as the market standard. Going forward the PEPP Working Group will be further looking amongst others to promote investor-side incentives for PEPP financing and to lift remaining obstacles to its development.
The release of the Guide has been welcomed by the official sector in Europe with the following comments:
Michel Sapin, French Minister of Finance, said: “The Guide presented today by ICMA, which builds on existing standards - like the Euro PP Charter, launched in Paris in April 2014 - is a key element to foster the development of a private placement market in Europe. This should be one of the building blocks of the Capital Market Union."
Christian Noyer, Governor of the Banque de France, said: “Building on the Charter for Euro PP, the European Guide is a new milestone for the emergence of a private placement market in Europe and the diversification of financing sources for the real economy. All Paris financial center stakeholders played a major role in the success of this initiative. I take this opportunity to reaffirm Banque de France’s support for this endeavor".