06.02.2014
Credit Guidelines

Private placement – loans to companies issued by insurance companies

After an intensive review, the German Federal Financial Supervisory Authority (Bafin) has approved the 2013 5th Edition of the Credit Guidelines. The Credit Guidelines were comprehensively revised and updated. The goal was to clearly improve their practicability. For this purpose, specimen contracts for Schuldscheine (German fixed or floating debt instruments) have been brought up to date and the possibility has been created to issue Schuldscheine to a certain extent even without a contractual agreement on financial ratios of companies.

In order to facilitate or, in many cases, to initially make it possible for insurers to issue Schuldscheine (sometimes translated as “certificates of indebtedness”) to enterprises with strong credit quality, the possibility has been established in the new Credit Guidelines to issue Schuldscheine within the framework of a five-percent loan quota without expressly agreeing on key financial ratios or a special termination right on the part of the insurer. An important hurdle is thereby overcome, as prime-rated debtors in the past often rejected such agreements as being too restrictive.

The financial ratios contained in the Credit Guidelines for the credit assessment of unrated companies have proven themselves and were kept unchanged. Irrespective of the simplification regarding contractual agreements on financial ratios, the loans can only remain within the five-percent loan quota so long as the financial ratios are met. If the financial ratios are breached, the loans must be allocated to the escape clause or to the residual assets.

BaFin published a guidance note to accompany the new Credit Guidelines. In addition to a presentation of the current administrative practice, the guidance note contains the introduction of the new five-percent special quota within the 50-percent mixed quota for Schuldscheine that do not meet the full scope of collateral requirements through a negative pledge clause. This includes both the Schuldscheine dealt with in the Credit Guidelines without any contractual agreement on financial ratios as well as other Schuldscheine that do not meet the high minimum rating requirements for Schuldscheine through a negative pledge clause.

The 2013 5th Edition of the Credit Guidelines is available free of charge in our Download Service.

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Private placement – loans to companies issued by insurance companies

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