Competition among the Schuldschein platforms is growing. LBBW is now also launching a digital platform for Schuldscheine together with the Börse Stuttgart. DEBTVISION’s first issuer is a well-known agricultural trader.
The selection of digital Schuldschein platforms is growing: LBBW and the Börse Stuttgart have created a digital platform for Schuldscheine. The first transaction via the DEBTVISION platform will start today, Monday. The trading and services group BayWa is marketing a Schuldschein exclusively via this platform.
„After numerous classic issues on the capital market, we are now choosing a digital solution for the first time in order to benefit from the efficiency gain,“ says BayWa CFO Andreas Helber. „We expect to gain access to a new and innovative financing option“ . With this „digitally based capital market financing“ , BayWa is underpinning its „willingness to innovate digitally not only in its core business but also in its corporate functions“, the BayWa CFO continues. Details of the transaction, such as planned volume and maturity, are not known, however.
DEBTVISION initially focuses on experienced Schuldschein issuers
However, issuers wishing to use the new platform should fulfill some conditions. DEBTVISION, for example, is aimed exclusively at companies with an investment grade credit rating. However, an external rating is not necessary. According to LBBW, it is also focusing initially on „experienced issuers“ that have already been active in the market. „We have no problem with having debut issuers also process their issues via the platform,“ says Joachim Erdle, Head of Corporate Finance at LBBW. „However, these are not our focus at the outset.“
The planned Schuldschein should have a minimum volume of EUR 20 million. „Less makes no sense at the moment for cost reasons,“ says Erdle. Once the marketplace has established itself, however, smaller volumes would also be possible, since the platform would make costs lower – and thus small and medium-sized companies would also be a possible target group in the future. Probably because of the difficult experiences the Börse Stuttgart had with the BondM segment for medium-sized companies, the question of the quality of the issuers is even more important with the new approach.
Schuldschein placement: twice as fast and significantly cheaper
According to LBBW and the Börse Stuttgart, there are tangible advantages to using the digital platform: Overall, issuers should be able to save 50 percent of the costs and 50 percent of the time as soon as the digital platform is connected to the blockchain by placing their notes via DEBTVISION in comparison to the conventional placement of Schuldschein. This technology has already been used independently of DEBTVISION by car manufacturer Daimler and mobile communications group Telefónica together with the Landesbank.
The reason: By linking the digital marketplace with the blockchain, which the initiators expect to be implemented in the course of this year, the entire Schuldschein process will become digital: from preparation and marketing to implementation and settlement. This means that manual processes, which still characterize a Schuldschein transaction in the conventional way, will no longer be necessary.
LBBW makes itself superfluous as an intermediary
Another major advantage for the issuers is that the companies can „completely carry out“ the entire process themselves, LBBW advertises. This means that banks can no longer act as intermediaries for DEBTVISION – and LBBW makes itself superfluous in the process. „Yes, that is one of the consequences that can be associated with this,“ confirms Banker Erdle when asked by DerTreasurer. „The complete digitalization of the Schuldschein process will redefine our role and focus even more on advisory services.“
Consulting and structuring will continue to be a key element in many transactions and could not be digitized, says Erdle. „It is our very own business to find the right financing for a corporate project. With Frequent Issuers such support may no longer be necessary.“
With this, DEBTVISION follows a similar path as the two digital platforms Credx and Firstwire, which also bring issuers and investors together directly on their platforms and do without banks as intermediaries and arrangers.
LBBW has an advantage over other digital platforms
The competitor and arranger platform VC Trade, which Helaba launched in mid-March and which BayernLB has since joined, is taking a different approach. In addition, the Landesbank explicitly intends to bring competitors on board with its core regions in Hesse and Thuringia. „VC Trade is not a platform that Helaba wants to use alone,“ Helaba banker Andreas Petrie told DerTreasurer two and a half months ago. „Only those platforms that are open to other [banks] have a future.“ LBBW is much more cautious: DEBTVISION is also open to other banks. Initially, however, the focus is on developing the platform further quickly, says the Süddeutsche Landesbank.
When asked why LBBW did not join VC Trade itself, Banker Erdle says: „The combination of digital platform and blockchain does not represent any other marketplace so far. But we will soon be offering everything together that is necessary to implement the digital Schuldschein process“. Additional functionalities such as rating services and communication via chat are to be added on an ongoing basis.
Further transactions are already in sight: „We will see several more transactions in the next one to two months,“ Erdle is confident. The aim is to attract further investors as quickly as possible, says the banker. According to him, a double-digit number of investors has already joined DEBTVISION at the moment.
DEBTVISION should develop into a trading platform
In addition, DEBTVISION is also intended to enable pure trading with Schuldschein in the future and thus create a secondary market. „We would like to develop DEBTVISION from the marketing platform to a Trading platform and for this the Börse Stuttgart is the ideal partner“, says Erdle.
Both financial service providers have set up a joint subsidiary in Stuttgart for this purpose. However, it is still uncertain at the moment whether the Schuldschein will develop from a buy-and-hold instrument into a traded instrument. In contrast to bonds, many issuers appreciate the private and unlisted character of the instrument.
Consolidation among digital platforms likely
DEBTVISION, with today’s launch of the BayWa Schuldschein, joins other digital debt issuance platforms such as VC Trade, Credx, Firstwire and the European Private Placement Facility (EPPF). All these platforms are still in their infancy. It is not yet clear which of the digital marketplaces can and will prevail. However, a selection, especially of the Schuldschein platforms, is very likely.
LBBW has a clear vision: „DEBTVISION is to become an important European marketplace for debt products,“ says Erdle confidently. In the coming year further Debt products are to be raised on the platform.