For listed and non-listed companies, issuing bonds can prove to be an interesting variant on company financing. Compared to bank financing, bonds offer the issuer liquidity benefits, often in combination with interest rate advantages due to the typically final maturity. However, higher expenses may be incurred for structuring and distribution, depending on the type of bond and the issuing process. For this reason a bond requires a minimum volume if it is to compare favourably with a bank loan, although this is lower for private placements than for issues on the regulated market. In case of a private placement of a bond, it is not just rating by an agency that can be waived; if the bond is offered only to qualified investors, and the minimum denomination is greater than 100,000 euros, there is also no need for a prospectus pursuant to the Wertpapierprospektgesetz (WpPG) (Securities prospectus act). Differences to the bank credit do not only exist in the restructuring process, but also in the transferability of the bond, and in its ability to appeal to a wider audience of potential lenders.
In contrast to classic bonds, mezzanine financing, such as profit participation certificates, cannot unambiguously be associated with equity or debt financing. This financing is usually subordinate to outside capital and is counted as equity for economic purposes.
BDO is a long-standing Deutsche Börse listing partner and understands both the financial needs of companies and the requirements of banks in corporate financing. We work together with accompanying underwriters (arrangers, book runners, lead managers) as well as issuers of outside and mezzanine capital. Our due diligence checks reduce possible information asymmetries between the issuing bank and the issuer, by ensuring transparency with respect to the issuing company, and providing statements on the plausibility of the business plan and debt-servicing capacity. Our services also include issuing audit certificates (comfort letters), where we are engaged as the auditors.