The small French private placement market, traditionally a preserve of larger public companies, is growing rapidly. French bankers expect it will soon provide some €15 billion to €20 billion a year of funding and to account for more than half of the total debt of unlisted mid-market companies.
French real-money investors, including large insurance companies, notably Axa, have been keen to diversify away from large concentrations of exposure to the bank and sovereign sectors and to diversify instead into corporate credit that offers some yield. Insurance companies also have a capacity to stomach liquidity risk that they see a chance to monetize by taking on large blocks of exposure from borrowers that would have traditionally relied on bank loans.
It was back in 2012 that Axa announced a tie-up with Société Générale to source such investments from among French SMEs at a time when the French regulatory authorities were growing nervous of potential constraints on funding to French companies owing to bank deleveraging. The first such private placement was quickly announced for Sonepar, an independent family-owned French company with a global market leadership in business-to-business distribution of electrical products and related solutions.
Axa, having initially been presented with a long list of assets to diversify into that banks no longer want to fund, including shipping, aircraft, corporate credit and infrastructure, has chosen to concentrate on the last two.
