The aim of this alternative market is to produce between 20 and 30 bond auctions a year. Those will be of between 20 and 25 million euros (26 and 33 million dollars), but the minimum will be 10 million euros (13 million dollars) according to the government draft proposal, says news agency Europa Press who first reported the news.
In Spain there are around 780 companies that could issue bonds in this market, those with an EBITDA over 12 million euros (15 million dollars), a rating of or over B, a debt per benefits ratio less than 3.5, an increase of income and EBITDA of or over 5% between 2011 and 2012 and an income internationalized and diversified. 53% of those companies are industry sector and 24% retailing.
With this new market announced by Spanish President Mariano Rajoy at the latest State of the Union debate, the government intends to make alternative finance sources available to Spanish’s SMEs, once that credit from banks is tight. Non-banking lending represents 22% for Spanish’s SMEs, compared to France’s 55% , Germany’s 45% or US’s 70%.
The proposed draft specifies that MARFI’s aim is to develop a mechanism that allows healthy and solvent companies to get liquidity in the short term, attracting capital mainly from national and foreign institutional investors.
To guarantee success of this new market, the government is studying the possibility of articulate fiscal incentives to equalize investment in this and other secondary official markets. This incentives could be done for both direct investment and that made through an investment package that has a determine percentage invested in this type of assets.
Auctions will be made of bonds and promissory notes, short term, says the official draft, even if it doesn’t exclude long term instruments negotiation. “That will allow the issuer to gain scale economies if he decides to issue different type of bonds and to the investor to find the vehicle that most accurately fits into his risk-profit objectives”.
Lastly, the ministry of Economy affirms that the requisites SMEs will have to comply with will be more flexible that those existing in the secondary official markets, but exigent enough to secure transparency and information regarding the solvency of a company.
In particular, annual audited results could be required, and also semester reports and the publication of relevant facts. The brochure, a document necessary to issue in secondary markets, will be substituted for a simpler document report with an standardized format, approved by the National Commission of the Stock Market (CNMV, in its Spanish initials).
Regarding evaluation of solvency, the government could accept the fact that the SME doesn’t have a credit rating could be substituted by a solvency report, but the companies will be the ones deciding which option to choose depending on the investors preference.