05 Jun Identifying market and regulatory obstacles to the development of private placement of debt in the EU

Abstract

Private placement of debt can play a key role in the financing of EU businesses. In line with the CMU Action Plan, this study identifies best practices in the well-functioning EU markets of private placements (mainly the German Schuldschein and the French EuroPP) as well as potential barriers to their development. The study shows a considerable growth potential for private placements of debt in the EU as they create specific opportunities to issuers and investors alike. Most notably, private placements allow medium-sized firms to access new funding opportunities and reduce their reliance on bank funding. They allow investors to diversify their investment portfolio to unrated, private firms while earning an attractive return. Further, the risk-profile of private placement instruments is not substantially different from senior unsecured debt. No major regulatory barriers preventing further growth of private placements in the EU have been identified as requiring immediate attention. However, some steps could be taken at European and national level in order to foster the development of private placement markets.

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