Torsten Hinrichs, CEO, opened the event that attracted over 50 attendants from the local financial industry and business and featured speakers from Scope, as well as external perspectives from the financial community in Spain and Germany.

SMEs: lessons from Germany and Spain
Spain is one of the fastest growing markets in Europe. Following the financial crisis, reforms in banking are leading Spain’s recovery out of recession and helping companies get financing in the capital markets.

Financing of SMEs took centre stage, a segment that suffered more than most during the crisis and which Scope believes there are lessons to be learned from both the Spanish and German experience in the last few years. Scope’s expertise in both markets gives it a special edge in this important segment of rating corporate financing.

Christian Hendker, from Talanx Asset Management in Germany, highlighted that the Spanish SME market attracts institutional investors and expressed the importance of a stable ‘home’ sovereign so the country can diversify into mid-sized corporates. He pointed out that although the market accepts investments in the form of bonds and loans, a well-established business model and manageable leverage are still basic prerequisites, along with a minimum credit quality of BB-.

Sebastian Zank, Director Corporates at Scope, shared lessons learned in Germany from its local SME bond market. Since 2010, the German SME bond market has suffered 26 corporate defaults and four selective defaults, affecting 34 corporate bonds at a total debt volume of EUR 1 billion. Zank noted that German market participants have since adjusted: debt advisors now scrutinise new issuances more heavily and issuers offer protection to creditors through tangible collateral or stricter covenants, and exchanges have tightened requirements for a listing’s transparency. He predicts that although it will take time to restore investor confidence in German SME bonds, the market will likely overcome this. (see Scope study ‘Lessons learned in the German SME bond market’, at www.scoperatings.com).

Carlos Marino, CFO Tecnocom, gave the audience an insight into bond financing from an issuer’s viewpoint. Taking the audience step-by-step through the pre-issuance process, he showed the positive impact a public rating has on a company, broadening its investor base, and strengthening a company’s image and strategic position and increasing its range of financing options. Keynote speaker, Gonzalo Gomez Retuerto, managing director of MARF and Grupo BME, however, cautioned against bond financing being used as a lender of last resort, offering pertinent advice on the criteria needed for a successful bond issue on MARF.

Native Spaniard, Carlos Terré and Deputy Head of Scope Ratings’ Structured Finance team, concluded the presentation with his recent analysis of Spanish SME CLOs during the crisis and the lessons for the current market. He noted the importance of providing long-term references to accurately reflect a portfolio’s performance over the entire economic cycle and especially in economic downturns, in order to calibrate adequate protection for highly rated tranches. The resulting analytical framework can produce reliable ratings that protect investors against cyclical volatility (“Forward to the Past”, available via www.scoperatings.com).

Sharing knowledge, gaining ground
After the presentations, investors, issuers and other market participants joined in a discussion and exchange of views on the themes addressed. The event gave market participants and the local finance community the opportunity to meet Scope’s analysts, and learn about what Scope can do for local industry, and what it could offer the Spanish market. For Scope, it was a chance to test the water of the Spanish market – making clear that its insights in banking and corporate franchises, and among SMEs, are well received.

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