Private placement

A private placement is a fundraising through an issue of securities, equity or debt, addressed to a limited number of selected investors. Article L. 411-2 of the French Monetary and Financial Code permits an offer addressed exclusively to qualified investors, within the meaning of article 2 of Regulation (EU) 2017/1129, or to a restricted circle of investors acting for their own account. Article D. 411-4 sets this restricted circle at fewer than 150 persons, excluding qualified investors. The issuer then falls outside the regime for offers to the public, which imposes review by the market authority and information disclosure obligations. In debt, a private placement takes the form of bonds or loans that specialist funds and insurance companies subscribe. The French market formalised its practices in the Euro PP Charter published in 2014, accompanied by French law documentation templates. The Loan Market Association publishes its own templates for these transactions. For the borrower, the small number of investors allows direct negotiation of the terms, including the covenants, the repayment schedule and the conditions for early repayment. Any later amendment to the agreement requires the consent of the holders under the majority conditions set at issuance.

A mid-sized IT services company issues €60m of seven-year bonds to four insurers and two debt funds, all qualified investors. The offer falls under article L. 411-2 of the French Monetary and Financial Code. The six subscribers negotiate a leverage covenant and a change of control clause with the company.

• Each subscriber’s status as a qualified investor, or a number of subscribers below 150
• The documentation chosen: Euro PP template, LMA template or bespoke agreement
• The financial covenants negotiated with the subscribers
• The conditions and cost of early repayment