by Claire Mauduit-Le Clercq, Associate Director, Mid-Market Evaluation; Corporate Ratings EMEA, Standard & Poor’s Rating Services and Alexandra Krief, Director, Head of Mid-Market Evaluation & Credit Estimates, EMEA, Standard & Poor’s Ratings Services
While French mid-market firms have adopted prudent financial strategies since the financial crisis, Standard & Poor’s analysts Claire Mauduit-Le Clercq and Alexandra Krief discuss how pressured competitiveness and stagnant investment levels are inhibiting France’s economic recovery, and how French midsized companies must seek alternative funding sources to fill the gap left by banking disintermediation.
Economic forecasts show that France is lagging behind an already slow European recovery – driven by an overall decrease in manufacturing output. This production loss – combined with a weak economy – means that French midsized companies are hesitant to kick-start investment programmes. Yet despite the absence of substantial funding growth, we predict that the French mid-market sector will need to raise around €690bn of debt in the next five years, mainly related to refinancing needs. And with ever increasing banking disintermediation, these firms will need to look outside to complement traditional sources.
One option is to tap private placement and direct lending markets, which have begun to help French midsize companies diversify their sources of funding. However, mid-market firms will need to improve transparency around their credit quality if they want to attract this kind of investment.