LocationsThe capital market has a simple task of bringing together entities seeking capital with entities lending capital. It is not only companies who seek capital, but governments and other institutions too. The motivation for most institutional capital lenders is the prospect of multiplying their money through interest. LBBW acts as an agent between the two parties. It has built up a first-rate network of investors, not only in Germany but far and wide.
LBBW assumes an intermediary role when the amounts of money involved are too large for a traditional credit facility – or if more attractive conditions are possible through the capital market. This is not the only advantage of capital market finance for companies: Investors don't want to get involved in the operational side, and the borrowed amounts don't have to be paid back until years down the line.
However, the processes involved are more complex than for traditional credit facilities and mean you having to disclose your company's key business figures to potential investors. Fortunately, investors and agents are subject to strict confidentiality requirements, and unavoidable ratings are often designated "private ratings" – accessible to an exclusive circle of people only.
There are four forms of capital market finance that are particularly attractive to German companies
Syndicated loans
Syndicated loans are suitable for the capital market. LBBW is happy to help put borrowers in touch with (new) investors for broad syndication. It has a first-rate network of investors including other banks and – where required – also institutional investors. This type of syndication is possible far beyond the borders of Germany, too. Customers get their finance from a single source as they are accustomed, specifically from LBBW.
Bonds
Bonds are generally only worthwhile from amounts over EUR 500 million, one reason being the complex and time-consuming rules involved. Companies can also use bonds to shoulder major investments without having to relinquish control.
Schuldschein (Promissory notes)
The Schuldschein is less complex than bonds because they are offered only to a select group of potential investors. A Schuldschein can also involve smaller amounts than bonds.
ABS solutions
Asset-backed securities financing involves selling a company's accounts receivable in a bundle – buyers of these receivables may also include capital market investors.
The benefits of capital market finance
- Broader investor base: The company is not dependent on a single lender, which increases entrepreneurial independence.
- Bonds and Schuldschein (promissory notes) don't have to be repaid until maturity when they are settled at one go. This enhances liquidity in the intervening years.
- No recourse to company assets: Covenants agreeing not to sell or pledge certain assets suffice.
- It raises the company's profile with investors, which can facilitate transactions on the capital market in the future.
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