Introducing a New Hybrid Recapitalisation Instrument for Smaller EU Corporates

Foreword

The effects of the COVID-19 pandemic continue to pose challenges to businesses across Europe. While many large and listed companies have been able to access funding through the capital markets in attractive terms, many smaller and unlisted companies have relied on government support programmes and bank lending. As economic conditions gradually improve, it is vital that smaller unlisted companies and midcaps with the potential to drive economic growth have access to ample fresh capital to invest in innovation and their future growth. Alternative types and sources of funding will be required to meet this challenge.

In our paper, ‘Recapitalising EU businesses post COVID-19’, released earlier this year, it was estimated that with the gradual reduction of state support measures, Europe could be facing a funding gap of €450-600bn in equity and hybrid capital to prevent business defaults. Yet, while the report successfully identified the nature of the funding challenge facing Europe, the next step is for market participants and policy makers is to work together and devise pragmatic solutions at the EU and the national levels. 

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