Klea Holding, previously known as Visiomed, launched a Credit-Link Note financing at the end of July, marking a first for the Euronext Growth market. The experts at AURIS Finance, a consultancy specialising in mergers and acquisitions, provide an in-depth analysis of the transaction.
Klea Holding, a company specialising in the acquisition, development and digitalisation of businesses, particularly in the healthcare sector, has just finalised an unusual financing package for a small cap company. The group has become the first French company in its class to launch a CLN (Credit-Linked Note).
Bond and credit derivative
This structured financial product is designed to combine the characteristics of a conventional bond with those of a credit derivative. It is a debt security, typically issued by a bank, which is presented as a conventional bond with a credit option incorporated. In the absence of a credit event on the reference entity, the investor will receive regular notes and the capital will be repaid at maturity. In the event of a credit note, note payments cease and the investor may incur a capital loss. From the investor’s perspective, a CLN offers the potential for a higher return than a bond, while also providing indirect access to the credit market. This allows for the diversification of a portfolio. CLNs are therefore an attractive option when interest rates and risk premiums are high.
A seldom used financial instrument
For the issuing company, the CLN represents an effective means of attracting investors, offering a structured product that provides more opportunities than a simple bond issue. It is worth noting that this type of arrangement is seldom employed in the context of small caps, defined as listed companies with small market capitalisations, often listed on markets designed specifically for growing SMEs, such as Euronext Growth. The rarity of this product can be attributed to two key factors. Firstly, the complexity of its structure necessitates advanced financial and legal expertise to set up. Secondly, the limited liquidity of small caps can make it challenging to accurately value and resell the product. Due to the perception of higher risk associated with small caps, CLNs are less prevalent in the market. Investors are exposed to the credit risk of both the issuer and the reference entity, which can make them a less attractive option.
Long-term financing
The new financing will allow Klea Holding to refinance its debt and support its growth in France and the Middle East. The two-year CLN carries an annual note of 12% for the duration of the investment, with the capital returned to investors at maturity. This type of financing, which is particularly uncommon in this asset class, demonstrates Klea Holding’s ability to attract and reassure investors. At the time of issue, the Group had cash reserves of €2.5 million. The company, founded in 2007 under the name Visiomed Group, has a consistent track record of supporting young healthcare start-ups in their innovation efforts. Each acquisition completed by Klea Holding has been accompanied by a notable increase in the number of innovations brought to market. The group has also diversified geographically, setting up operations in the Middle East in 2021.
Our experts at your service
In France, the CLN financing issued by Klea Holding has the potential to pave the way for other small caps. It is not uncommon for companies in the growth phase to overlook this type of financing due to a lack of guidance. Nevertheless, when a company is demonstrating robust growth, CLN financing can facilitate the attraction of new investors. AURIS Finance experts boasts extensive sector expertise. They can assist you in your search for finance and recommend the most suitable options for your needs.
