A Debt Pioneer Looks To Usher Schuldschein Into The Digital Age

FEW PEOPLE CAN CLAIM to have created a new debt market. Andreas Petrie is one of them. And more than two decades after his breakthrough deal, he’s once again driving a transformation.

- Jacqueline Poh

Petrie wants to see Europe’s largest private debt market escape a tangled web of phone calls, emails, and faxes by shifting to digital platforms within five years. The technology drive is also a key part of efforts to expand so-called Schuldschein lending beyond the German heartland and into global markets.

“The room for growth is huge,” says Petrie, the Frankfurt-based head of primary markets at Landesbank Hessen-Thüringen, or Helaba. “The world is constantly moving toward a digital age, and we need to be creative.”

PETRIE’S ORIGINAL BRAIN WAVE in 1996 was to introduce corporate borrowers to Schuldschein, a bond-loan hybrid then mainly used by European sovereign and financial institutions. German banks led by Helaba, Landesbank Baden-Württemberg (LBBW), and Bayerische Landesbank have since built the idea into a market that reached record issuance of €35 billion ($40 billion) in 2017, before slowing this year. Investors have flocked to a product offering comparatively high yields from generally investment-grade issuers, even after a couple of recent high-profile blowups. Borrowers appreciate a number of features: Schuldschein don’t need credit ratings; transaction details can remain private, unaffected by this year’s stringent Markets in Financial Instruments Directive II; and paperwork is light, even for billion-euro deals.

“The beauty of Schuldschein is in its flexibility,” says Paul Kuhn, head of debt capital markets origination at Bayerische Landesbank, or BayernLB. For closely held or unrated companies otherwise cut off from capital markets, the product is the best option, he says.