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A growing use of mini-bonds and factoring in 2014 to overcome the credit crunch

by Chiara Bussi

The credit crunch eases its bite a bit, but Italian companies are looking for alternative instruments to raise cash. Mini-bonds; factoring; making available one's capital to a private equity fund; listing on the stock exchange: these were the four paths chosen in 2014, and this trend is expected to grow even this year.

The year 2014 and the first months of 2015 were distinguished by an ever increasing diffusion of mini-bonds that reached 100 for a total of €4.8 billion. What's new, as the “Minibond Market Trends Barometer” by Epic and MiniBondItaly demonstrated, is the increase in issues with an issue size lower than €50 million each, that, according to the data updated at the end of March, comes to 81 issues with a total market size of 774 million. “It is the sign that these instruments are finally becoming mini, with a real focus on SMEs,” underscores Marco Belmondo, Marketing Manager for Epic, the digital platform independent of the banking system, the meeting point between SMEs and the institutional investors.

Mini-bonds under €50 million have an average issue size of €9.5 million, a maturity of 5.8 years, and they are issued by companies with revenues of €78 million. Among the smaller-sized bonds, the most represented sectors are utilities and energy (37%), manufacturing (10.4%) and financial services (9.7%). The territorial map demonstrates that the majority of issuers are based in the North. According to the elaborations by “Barometer,” 80% of the issues were concentrated in Veneto, Lombardy, Emilia-Romagna, Tuscany and Piedmont.

2014 was the year of revenge for factoring, the selling of credit to a specialized company to free up cash. After a drop in 2013, the volumes of purchased credit reached 178 billion, an increase of 2.8 %. “The result in part can be explained by the credit crunch, but on the other hand, it demonstrates that the companies are realizing the effectiveness of this very flexible tool. It should experience a further growth even in 2015, with an expected increase in turnover of 3% to reach between 185 and 190 billion,” says Alessandro Carretta, the General Secretary of Assifact and Professor at the University of Tor Vergata.

Narrowing the focus on the territory, it is clear that a third of the companies that turn to factoring are based in Lombardy, followed by Lazio and Piedmont.

Another path that companies can choose for growth is that of private equity. In 2014 the investments remained substantially stable at 3.52 billion with respect to 3.4 billion in 2013. “Our perception for 2015” underscores the General Director of Aifi Anna Gervasoni, “is a further step forward.” The interest by foreign operators in Italian companies is, however, growing with a total investment increasing from 1.3 to 1.9 billion. As of today the private equity and venture capital operators have a portfolio of 1,245 companies that employ a total of 480,000 people and have a turnover of 100 billion. Since last year, companies, especially medium-sized ones, are once again looking to the stock market with interest. In 2014 the IPOs were 28 (with respect to 20 in 2013), 22 of which are on AIM Italia (Alternative Investment Market, ed.'s note), the segment dedicated to SMEs.

This year 6 companies have already been listed (2 on the main market and 4 on AIM) with capital raising that reached half a billion euros coming almost entirely from capital increases. “We are registering a growing interest for the listing on the part of companies from various sectors who want to make that great leap forward with investments or through greater international projections,” underscores Massimiliano Lagreca, the head of Large Caps & Investment Vehicles on the Italian Stock Exchange. For 2015 estimates are for a further increase for these first-time listings to arrive at the number 20 before the summer and 40 before the end of the year: approximately 30 on the AIM and ten or so on the main market.