Independent expert interview – Marie-Paule Noël,
Partner at Jeausserand Audouard,
on SMEs private debt financing

What are bonds financing advantages for growing SMEs?

I would say there are several advantages. First of all, as a lawyer, I note that the documentation itself is more flexible than banking documentation; banks have their own market standards and they often syndicate the loans. They cannot therefore deviate too much from accepted market practice. On the other hand, in bond debt, we will often find with a single interlocutor who will rarely syndicate, which will give us a much greater margin on documentation to really adapt it to the company's needs, which is very appreciable.

There is also, moreover, the very characteristic of bond debt, which is the in fine repayment, which can obviously help companies in their development, even if we see that amortizable debt is also developing. As I was saying, what is also interesting for our clients is to have this single interlocutor, the same fund in front of him for the entire duration of his financing.

Finally, I would say, in view of the discussions I have had with my clients and their debt funds, that debt funds often coexist with private equity funds that have the practice of investing in companies in which they invest; thus, debt funds benefit from the knowledge of other funds in their sector, allowing our clients to benefit from possible synergies with other companies in which they have investments. So there is also an advisory aspect that the debt fund provides, which the bank would not necessarily provide, which is very interesting for our clients.

What was the context of your SME clients' private debt financings ?

It's very varied. Very recently, we financed an external growth operation with bond debt. We are also financing more and more MBOs with bond debt and what is also interesting in the program is that we put in an acquisition debt that allowed us to take the sponsor out and also set up a bond program to finance external growth.

We realize that bonds financing today can finally be used for different types of projects depending on the needs of the client, which makes it very attractive.

How will the private debt debt market evolve in the coming years?

In a rather positive way: I think it is a market that is destined to grow enormously, due to the variety of projects it finances. This is a real response to a company's need for financing in addition to banks; and there is also a lot of liquidity, in other words there is a real demand from debt funds to finance projects.

This will make it possible to provide nice answers also to companies’ financing needs, given that there is a lot of liquidity, the funds will try to finance as many projects as possible and will certainly be very creative on the solutions to be proposed to companies. And indeed what is also very interesting is that these types of debts can be of very different amounts to support any type of actor, any type of project. I therefore think that this is a sector that is destined to develop.