Capital Efficiency Group, a Swiss banking boutique, plans to sell two bond transactions bonds backed by loans to small-to-medium-sized enterprises in Germany, Austria and Switzerland in the coming year. Both sales will be about €600 million and will include loans from new jurisdictions to improve diversification, according to Bernd Reuther, managing director.
CEG, based in Zug, developed a structure called PREPS (Preferred Pooled Shares) last year which help finance European SMEs and give investors exposure to the unlisted companies constituting a significant part of Europe's economy (BW, 4/25). CEG aims to structure similar transactions to provide funding for SMEs in an expanding number of jurisdictions on an ongoing basis, according to Reuther.
The third sale in the program, PREPS 2005-1, will likely include more loans to non-German SMEs, unlike the previous deals. While the first sale consisted 100% of German loans and PREPS 2004-2 included just one Austrian loan, CEG's next deal may include five to 10 loans from Austria. This would represent up to 20% of the underlying collateral. CEG aims to include collateral from Switzerland in its fourth offering and plans to expand to non-German-speaking jurisdictions thereafter, said Reuther.
J.P. Morgan underwrote the second deal together with HypoVereinsbank, which was sole underwriter on the first offering. Reuther said both banks will likely be involved in the structuring and distribution of the next deal.