Recapitalising EU companies – An innovative way towards sustained and inclusive recovery

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Udvalgets udtalelse: Recapitalising EU companies – An innovative way towards sustained and inclusive recovery

Press release 

Promoting the recovery of Europe's SMEs with hybrid funding

Key points

The EESC:

  • notes that EU companies rely excessively on banking financing, with an equity and capital shortfall estimated in EUR 450-600 billion. This poses companies at risk, especially considering current high levels of corporate debt and economic distress;
  • recommends encouraging new sources of funding through the development of a framework that enhances hybrid financial instruments, so that they are easy to implement, reinforce firms' balance sheets and support investment;
  • identifies highly subordinated instruments as the best possible option, as they:
    • are already regulated in some EU countries, henceforth being a secure instrument for Micro, Small and Medium-Sized Enterprises;
    • constitute an agile and easy to implement long-term solution;
    • are compatible with family businesses, as families wish to retain control of their firm;
  • recommends that these instruments enjoy a quasi-equity status, so as to not account as debt in balance sheets, and rank just before equity in waterfall payments hierarchy;
  • encourages a scheme that establishes collaboration between private and public institutions, including banks, asset managers, public sector, and institutional investors (insurers and pension funds);
  • highlights that an EU-wide instrument model could benefit from the visibility, liquidity and scale of the single market and generate broad appeal among institutional investors, encouraging investment and supporting the capital markets union.