Trade bodies unite to promote EU private placement market, Mifid II response

Leading financial trade bodies have joined forces to establish a guide to best practice in the European private placement market.

The International Capital Market Association (ICMA) has taken the lead in coordinating the work of the Pan-European Private Placement Working Group (PEPP WG) which comprises trade bodies, key investors, and market participants to develop a pan-European Private Placement market, initially by establishing a guide to best practice and facilitating the emergence of common market practices, principles and standardised documentation. It will also aim to identify barriers to entry for new issuers and investors into this market.

“Private placements are a key funding diversification tool for issuers and represent an alternative market financing source that could help address the reduction of available bank lending due to deleveraging,” said Martin Scheck, ICMA’s chief executive. “The PEPP Working Group aims to tackle the obstacles to the development of a robust private placement market in Europe which will benefit medium-sized companies by providing long-term debt finance which may not be available to them from the bank loan or bond markets.”

According to PEPP WG, 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, at a time when the banks continue to retreat from the long term lending markets.

Growing market
A number of sources approached by SRP said that private placement structured products have seen significant inflows since the beginning of the crisis with an increasing number of discretionary managers and family offices using structured products, mostly for hedging requirements rather than investment purposes.

The French and German domestic private placement markets issued approximately €15bn of debt in 2013 in addition to a further $15.3bn raised in the US market by European companies. S&P research indicates there is €2.7 trillion of debt that will need to be refinanced by mid-sized companies between now and 2018.

The PEPP WG includes the Association for Financial Markets in Europe (Afme), the Association of British Insurers (ABI), the European Private Placement Association (EU PPA), the French Euro Private Placement (Euro PP) Working Group and the Loan Market Association (LMA); as well as major institutional investors (Delta Lloyd, Federis Gestion d’Actifs, KBC Group, LGIM, M&G Investments, Natixis Asset Management), observers from the official sector (including the Banque de France and HM Treasury), and major law firms, including Allen & Overy, Herbert Smith, Kramer Levin, Linklaters, Simmons & Simmons and White & Case.

Mifid II
In addition, Isda and thirteen other trade associations have formed the Joint Trade Association Group to coordinate feedback to the revised Markets in Financial Instruments Directive (Mifid II) within a tight timeframe to submit comments on the new rulebook.

The European Securities and Markets Authority (Esma) published its consultation on Mifid II in May and gave market participants until August 1 to respond to the consultation as a first step in the process of translating the Mifid II/Mifir requirements into applicable rules and regulations aimed at improving financial market transparency and strengthening investor protection.

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Trade bodies unite to promote EU private placement market, Mifid II response