Issuance Scale "Halved"! Economic Outlook Clouded, German Companies Delay Debt Issuance

During the economic downturn, companies that are pillars of the German economy are putting their borrowing plans on hold. According to reports, the progress of Schuldschein issuances in Germany this year has been slow, with only four transactions totaling approximately 400 million euros (about 413 million US dollars). This is roughly half the value of seven transactions during the same period last year, and far below the 1.4 billion euros during the same period in 2023. It is understood that Schuldschein combines the functions of loans and bond issuances, making it popular among companies seeking private debt in Germany and Austria, and is also a major financing avenue for small and medium-sized enterprises. Small and medium-sized enterprises are seen as the core of Germany, the largest economy in Europe. Klaus Distler, head of debt capital management at Helaba, said: "Due to the uncertainty of the economic situation, companies are currently hesitating to invest. We have several transactions in preparation at the moment, but the Schuldschein market will remain relatively quiet in the coming weeks." Germany's GDP fell by 0.2% in 2024, and the situation is not expected to improve quickly. The German central bank predicts an economic growth rate of only 0.2% this year, and warns that if US President Donald Trump follows through on his tariff threats, the German economy could once again shrink. Borrowers may also remain cautious ahead of the early elections scheduled for February in Germany. The German economy has shrunk for the second consecutive year. The Schuldschein market began to decline in 2024: according to data compiled by Bloomberg, issuance last year decreased by 10% compared to the previous year, hitting the lowest level since 2021. The public syndicated bond market has lower spreads and lower financing costs, attracting large companies that may have previously participated in the Schuldschein market. This trend may continue this year. Car rental company Sixt SE, which has issued bonds in the Schuldschein market, last week issued five-year bonds in the syndicated bond market, attracting a large number of orders. Franz Weinberger, CFO of Sixt, said: "The syndicated bond market currently offers favorable conditions for us to fund further development." Sixt's latest bond issuance "achieved the lowest spread in the company's bond issuance history." Weinberger said: "However, this does not mean completely abandoning the Schuldschein market. Looking ahead, we recognize the importance of both bonds and the Schuldschein market, as they are key financing options that provide diversification and growth potential." Surveys show that the Schuldschein market will continue to face resistance in 2025, with new issuances not expected to exceed 25 billion euros.