For Europe to successfully fund its post-pandemic economic recovery, it will need to strike a delicate balance. This will be between achieving the necessary scale to accelerate Europe's corporate sector recovery while also adopting a tailored approach to funding through equity as well as existing and new hybrid instruments.
This was one of the key takeaways from AFME’s webinar, ‘Sizing and Resolving COVID-19 European Corporate Recapitalisation – Equity and Hybrid Markets Solutions’, held on 26 January 2021.
The event featured a panel discussion between policymakers and industry experts including Tatyana Panova Head of Unit for Capital Markets Union, DG FISMA, European Commission; Uli Grabenwarter, Deputy Director, Equity Investments, EIF; James Chew, Global Head, Regulatory Strategy, HSBC; Stefano Firpo, Senior Director, Intesa Sanpaolo.
AFME & PwC’s report, Recapitalising EU businesses post COVID-19, was used as a platform for discussions.
Tatyana Panova began proceedings by emphasising the importance of national, private and public sector collaboration and ensuring that crisis support is channelled to businesses. Tatyana said that re-equitisation is one of the priorities of the Capital Markets Union Action Plan and she welcomed AFME & PwC’s analysis that examines how equity finance can be promoted.
She explained that even though support through a public-private fund could help businesses, the right balance would also need to be struck. This would be between achieving the necessary scale in the investment available while also mitigating the additional conditions attached.
Panova acknowledged the potential benefits of hybrid instruments in supplying capital without as many conditions (e.g. requirements that diminish ownership control of a company). She mentioned that in encouraging greater use of the instruments industry should consider the impact of standardisation. She explained that in some cases 'straight jacketing' could reduce the benefits associated with hybrid instruments.
Similarly, Uli Grabenwarter emphasised the need for measures implemented to be sophisticated and accommodate the needs of specific companies. Different sectors have been affected differently by the pandemic, and therefore may have different growth perspectives and different funding requirements.
Speaking next, Stefano Firpo, touting the viability of hybrid instruments, stated that they were already a useful instrument in the market and greater standardisation would help reduce market fragmentation. Similar to Grabenwarter, he highlighted that equity needs in the market are also unequal, with certain companies and firms requiring significantly more than others. He stressed the need for an aggregation platform to help attract investment to smaller firms that might otherwise struggle to get funding.
James Chew emphasised that the measures to support Europe’s economic recovery are not a one-year program and need to be viewed from a long-term perspective. He highlighted that one of the greatest investment needs was in funding innovation in Europe.
Chew highlighted that industries have now changed due to the pandemic and will need to adapt. If firms are consumed by trying to stay afloat and are short on equity funding, they will be unable to innovate to boost their long-term growth prospects.
The session concluded with all panellists agreeing that Europe’s post-pandemic recovery and sustainability agendas are intertwined and should not be considered separately. As businesses restructure their business models and recover from the pandemic, it will be expected to be a sustainable recovery too.
Listen to the webinar in detail via our online recording.
Interim Head of Media Relations
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