Germany

Germany’s small and medium sized companies — the Mittelstand — are the envy of the industrial world. Yet their financing arrangements are often derided as old-fashioned. That is a mistake, argues Jon Hay. The strength of private, family ownership and the depth of Germany’s relationship-driven banking system are central reasons for the Mittelstand’s success. Now they are exploring a wider range of financial techniques — but at their own pace.

Most German companies have not suffered any funding crisis in recent years – collectively, they are the strongest group of corporate borrowers in Europe.

The equity capital markets are wide open for German issuers. If only they needed more equity, writes Nick Jacob.

While Frankfurt vies with Paris to be Europe’s financial centre, it remains eclipsed by London. As Chris Wright reports, the only possible way it can usurp London’s position is if the UK were to quit the European Union. And although its political relationship with Europe is fractious, the UK knows it has too much to lose to let that happen.

The impressive stability of German real estate is drawing an expanding equity investor base but the onerous requirements of listing mean supply will likely continue to lag demand. Lucy Fitzgeorge-Parker reports.

High redemptions, combined with deleveraging and a drive towards deposit funding has put net first quarter covered bond supply in 2013 on track to hit record lows, said Barclays analysts on Thursday.

Overcollateralisation should not be the main factor when rating agencies assess covered bonds, according to Commerzbank.

Core and peripheral borrowers are waiting for a better market before bringing benchmark covered bonds. Safe-haven names are traditionally first to take advantage of returning stability. But southern European borrowers, which offer higher yields, juicers spreads and are less flexible over pricing, will find execution easier, said bankers.

Trading in Spanish and Italian covered bonds was relatively stable against asset swaps on Monday, while they tightened versus their domestic sovereign bonds, following the news that Cyprus faces a bail-out from the European Union.

Vorarlberger Landes- und Hypothekenbank (Vorarlberger Hypobank) has picked banks to manage its first euro benchmark covered bond, which it plans to launch in mid-April, a funding official at the issuer told The Cover.

Deutsche Pfandbriefbank (Pbb) got the covered bond market off to a strong start on Monday, shrugging off weakening sentiment to launch a seven year mortgage backed Pfandbrief.

HSH Nordbank became the second German borrower of the year to fund SME loans with a covered bond this week, after using a KfW guarantee to turn the loans into eligible public sector collateral. As German Pfandbrief law bars unguaranteed SME loans, this approach offers an alternative to structured issuance. But bankers and analysts are divided over its viability.