(Bloomberg) -- A German debt market is opening back up for companies beyond Germany, with more French and Italian borrowers raising financing in 2024 than over the whole of last year.
Companies from France and Italy have raised €1.9 billion ($2 billion) this year of Schuldschein debt, a promissory note that combines elements of both bonds and loans, according to data compiled by Bloomberg. That’s up from €946 million in the full year of 2023. Italian borrowers account for €1.1 billion of this year’s total, a record amount of issuance from the country.
Investors became cautious about borrowers from outside of the traditional Schuldschein markets of Germany, Austria and Switzerland in 2022, after a French company, nursing-home operator Orpea SA, collapsed into a debt restructuring amid a scandal over its mistreatment of residents. Now, with that saga in the past and slower issuance from German-speaking countries, investors are once again piling into the available deals from companies outside the traditional markets.
“The effects of the insolvent French issuer are seen as an one-off effect,” said Paul Kuhn, managing director at Bayerische Landesbank, one of the main arrangers of Schuldschein deals. “There are hidden champions in France and Italy as well, with low default rates from the past and offering attractive pricing for investors versus German household names.”
Overall Schuldschein issuance this year is running nearly 25% behind the same point in 2023, the data show. Swiss chemicals company Clariant AG last month raised €500 million in one of the year’s largest deals so far, with the market yet to see a bumper-sized transaction like Porsche Automobil Holding SE’s €2.726 billion issuance from early last year.
On Tuesday, Italian technology and engineering company Maire SpA placed a €200 million sustainability-linked Schuldschein. Investor demand was strong enough that Maire raised the size of the offer and it priced at the tight end of spread ranges it was marketed at, according to the company.
“Regular and close dialogue with issuers and investors contributed to pave the way for the spreading of this tool also outside Germany,” said Patrick Mannl, director of Schuldschein syndicate at UniCredit SpA. “We expect this development to continue in the future, as investors’ appetite for solid Italian names proves to be strong.”
Still, the record Italian issuance is a small portion of a market that can see an irregular flows of deals.
This is “rather a common phenomenon for markets in Europe outside Germany. You will find that the flow of transactions is more irregular,” said Reinhard Haas, global head of syndicated finance at Commerzbank AG. “Once a borrower has issued in this niche market, it is very common to tap the market again.”
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