Participatory stimulus loans (PPR), we can’t say it’s a failure, but it didn’t work… No official figures have been released but the banks unanimously report that subscriptions are timid. The government accuses in particular the temporality, the PPR having been launched while the PGE (loans guaranteed by the State) were not yet finished. “PPRs also have little success because banks are not used to equity or quasi-equity instruments”says Yann Beckers, partner in the banking and financing group of Stephenson Harwood.
Persisting and signing, the Ministry of the Economy announced their extension, until the end of 2023, at the same time as a simplification and an enlargement of the target. But that doesn’t seem to be enough.
Stimulus bonds to diversify financing
The sisters of the PPRs, the stimulus bonds (OR), distributed by private lenders, seem to be doing well. Especially in this period of inflation which is accompanied by a rise in rates. “Companies are looking for fixed rates and above all to diversify their financing, with banks showing themselves to be more and more cautious and credit conditions tightening”, notes Yann Beckers. He also mentions the return in force of the obligation to sign hedging contracts, which increases the cost of credit.
Wishing to open up to other forms of financing, companies may therefore have realized that stimulus bonds have many advantages on their side: repayment in fine (therefore after 8 years, at maturity), no guarantee requested, quasi-equity instrument but without dilution (no entry into the investor’s capital and therefore no representation in the governance bodies).
Although they took a little time to set up, stimulus bonds would therefore find a new lease of life today. Another reason put forward by Yann Beckers: the recent publication of the accounts (closed on June 30) which allows companies to realize that they can be eligible for the system (the debt ratio must not be greater than 5). It should also be noted that only SMEs and ETIs with a turnover of more than 16M euros can benefit from ORs.
The importance of ESG criteria
Despite the many advantages of ORs, companies can be put off by the high rate (5 to 7%) and especially by the complexity of the device. Notably the obligation to present an investment plan which explains for what purposes the resources obtained will be used. Because stimulus bonds should not be used to repay loans or distribute dividends but to finance projects that will help companies get back on the path to growth. “Companies do not necessarily know how to prepare this investment plan. Exchanges must take place on this subject between lenders and companies.judge Yann Beckers.
Especially since most investors want to see these resources allocated to ESG projects. “It’s a big subject: private lenders have ESG obligations and will prefer to finance projects going in this direction in order to green their portfolio”, insists Yann Beckers. For him, all companies wishing to finance themselves today, via stimulus bonds or not, must ask themselves the question of ESG criteria and seek to improve them.