Private placement anyone? I mentioned it once and certainly didn’t get away with it.
In the infamous ‘Germans’ episode of UK comedy Fawlty Towers, the premise of the joke is that, in a desperate bid not to offend his German guests, Basil manages, by the end, to cause great offence.
I felt some empathy for Basil, back in September. I was chairing a panel on European direct lending and found myself, quite unintentionally, offending a German. It was all because of Schuldschein.
I made the mistake of referring to the Schuldschein market as a kind of German proxy to the wider European private placement market. It was a suggestion that turned my German friend and fellow panellist, puce. Suffice to say, he made it abundantly clear that first, a Schuldschein deal could in no way be compared to one of those pound-shop European private placements (he didn’t say pound shop), and second, I should jolly well brush up a bit on my research.
You see, to those in the Schuldschein market, the Schuldschein is a sacred object. Comparing it to a bog standard private placement is like telling a Michelin-starred chef that his filet mignon in sauce béarnaise is merely a steak with onion gravy. I didn’t realise this at the time. Schuldschein – as any self-respecting German financier will tell you - is a properly grown-up, uniquely German debt instrument designed to help sensible, smaller German companies to grow their businesses. Full stop.
And so that is why, when I saw that failed UK contractor Carillion was loaded up with €131m-equivalent of Schuldschein debt, I was more than a little wide-eyed in astonishment. What on earth was this lumbering, unsafe, non-German credit doing raising money in such a rarefied and unsullied market? And then, just days later, I saw that yet another failing non-German conglomerate – this time the South African retail giant Steinhoff International - was also loaded up with Schuldschein debt.
“What on earth is going on?” I thought to myself, as I rummaged around in my desk in search of my German friend’s business card so I could give him a call. I never did find his card, so I was unable to get an answer to the question: at what point does a Schuldschein deal stop being a Schuldschein deal and merely become a dodgy, steak-and-onion private placement? Luckily I’m going to be at our Schuldschein event in Frankfurt on 14th March so I will have the opportunity to ask then, and hopefully not offend too many Germans into the bargain.