Understanding Private Debt: Advantages, Risks, and Signa Holding’s Bankruptcy

2023-11-29 19:33:22

Published on November 29, 2023 at 8:33 p.m. / Modified on November 29, 2023 at 8:45 p.m.

Signa Holding is preparing to file for bankruptcy, the company of Austrian billionaire René Benko, which notably owns the Globus department stores in Switzerland and the emblematic Chrysler Building in New York, announced on Wednesday. On Monday, the Zurich bank Julius Baer announced that it had lent 606 million francs to a “European conglomerate”, which is none other than Signa, and had made provisions of 70 million, in anticipation of possible repayment difficulties. This financing was in the form of private debt, a financial instrument little used by wealth management establishments. What is it regarding? What are its advantages and the risks associated with it?

Private loans are similar to bonds, except that they are not listed on a stock exchange. These tools were developed following the 2008 crisis, when banks were subject to stronger regulatory requirements, particularly in terms of capital. Banks have therefore generally reduced the volumes of credit they grant, leaving space for other types of players: investment funds, asset managers or hedge funds, which are not subject to the same regulatory requirements. equity than banks.

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