A Euro Private Placement (Euro PP) is a medium or long-term financing transaction between a listed or unlisted company and a limited number of institutional investors, based on deal-specific documentation negotiated between the borrower and the investors, generally with the participation of an arranger.
Negotiation of contractual terms and conditions is an important feature of Euro PP transactions; it distinguishes them from public and syndicated bond issues, such as Eurobond issues where investors merely subscribe an issue without having any say in the terms and conditions. For this reason, the process for carrying out a Euro PP transaction more closely resembles negotiating a bank loan agreement than preparing the documentation for an issue of listed bonds.
The Charter, which was drafted by the Euro PP working group composed by several professional organiz ations under the auspice of Banque de France, French Treasury and the Paris IDF Chamber of Commerce and Industry, is designed to facilitate financing for intermediate-size enterprises (ISE) and SMEs, whether listed or not, that would be unable to access international bond markets, in particular, because they have not been rated by a ratings agency.
By establishing this charter which is a reference framework and best practices for French and international institutional investors, it has created the conditions for the development of the Euro PP market. It responds to both investors and issuers who must increasingly resort to the markets for financing. This “Euro PP” brand becomes a guarantee of quality for the issuers, dealers and investors and will facilitate the development of long-term relations amongst these various players.
Since then, a working group with over 60 persons has been created to work on prudential, eligibility aspects or promotion with the organization of an event in march 2015, documentation and Market information.
The Euro PP documentation working group releases two model private placement agreements for use on the growing Euro PP market and responding to the needs of both investors and issuers, of any size, French and international. By providing these model agreements to market participants, the goal is to promote the development of new funding tools through the emergence of a more efficient and integrated European Private Placement market via standardization of the contractual documentation. The Euro PP model agreements cover the entirety of the Euro PP market, whether in the form of loans or notes, while preserving the particularities of each segment. Completing the Euro PP Charter, which was published in 2014 and establishes a frame of reference for the market, these agreements provide a standard for the market. Nevertheless, market participants’ attention is drawn to the fact that the contractual terms are intended to be adapted as part of the Euro PP negotiations, based on the profile of the borrower/issuer, characteristics of the transaction and market conditions. The Euro PP model agreements were developed collectively, with active representation by all industry participants (borrowers/issuers, investors, intermediaries).
The group which was in charge of the Euro PP prudential aspects publishes a synthesis of the reglementory, prudential and reporting issues concerning Banking, insurance and asset management sectors.
In addition to the work conducted by the Euro PP working group, the Association française des marchés financiers (AMAFI), has published on 13 January 2016, a “Code of best practice for Euro PP arrangers” which is designed to standardize the best practices of the financial intermediaries acting as arrangers in Euro PP transactions. With this Code, AMAFI wishes to underline the key role played by an arranger in ensuring a smooth and successful Euro PP transaction. The Paris marketplace’s leading arrangers have already undertaken to apply the AMAFI Code. A list of these financial intermediaries, available at www.amafi.fr, will be updated periodically.
The Euro PP Working Group Steering Committee set up a working group dedicated to the legal and regulatory environment of Euro PPs, composed of representatives of borrowers, intermediaries and investors and co-headed by Hubert de Vauplane (Kramer Levin), Hubert du Vignaux (Gide) and Marc-Etienne Sébire (CMS Bureau Francis Lefebvre), who answered in march 2016 to “Frequently Asked Questions” on the Euro Private Placement (Euro PP) market: What is a Euro Private Placement (Euro PP)? Who are the members of the Euro PP Working Group? What is the Euro Private Placements (Euro PP) Charter? Where can I find a Euro PP model contract? Are the Euro PP model contracts tailored to my situation? How does the representation of investors work under French law? What is a masse? Should I get my Euro PP listed? Which law should govern my Euro PP transaction? What is done in case of insolvency of the borrower?
In January 2016, the Euro PP Committee decided to set up a Working Group on Financial Analysis and Credit Risk Governance issues. This work has mobilized nearly a hundred professionals, who brought their experience and shared their historical and prospective vision of the Euro PP market. This document is intended to be upgradable and may be completed in the future.