Many SMEs find that bonds are too large an instrument for their needs. The benchmark is usually EUR 500 million, which tends to be far more than a smaller company wishes to raise. One option to fill this gap is an instrument whose star remains firmly in the ascendant in the financial world despite its apparently antiquated name: the promissory note. The promissory note is a flexible instrument with a low entry threshold. Promissory notes starting from EUR 50 million can be ideal for SMEs and, as Klaus Distler points out, "There is no upper limit".
Carmaker Porsche, for example, financed its all-electric Taycan model with a one billion euro promissory note. Its proven flexibility renders this particular instrument attractive to companies from a wide range of sectors. Green and sustainable promissory notes are of course also subject to ratings, but these can be provided by smaller agencies as well. Green promissory notes dominated in the early years, but comprehensive sustainable promissory notes (sustainability-linked promissory notes) now account for the largest share of the market.
Helaba is the clear market leader in this segment, having arranged almost half of the total volume of sustainable promissory notes issued. Interestingly, a survey of promissory note investors conducted by Helaba found that sustainable investment was already a priority issue for nine in ten. Two thirds of respondents believe that issuing sustainable promissory notes is a sign of a fundamentally more successful business.
"I expect continued growth in social bonds. The pandemic is one of the driving factors here."
Klaus Distler, Head of Corporate Debt Capital Markets