Minibond

Duration: typically between 3 to 5 years.

Coupon: most minibonds provide a fixed coupon in annual terms and settled every 6 months. But it is also possible to find variable coupons linked to 3- or 6-month Euribor rates. Issue price: all minibonds on the market are issued at 100% of their nominal value. 

Repayment: it is possible for the capital to be repaid in full at the expiration date (so-called bullet) or in constant tranches throughout the entire duration (so-called amortizing), or again in constant tranches but only after an initial period (so-called grace period) of 1 or 2 years.

Covenant: are mandatory conditions that borrower must observe, under penalty of early repayment of the minibond. They are not always present, and may cover different aspects; the most common provide limits on profits, a commitment not to grant mortgage or guarantees, and a commitment to observe specific financial ratios.

All features are defined and described clearly in the Regulation of each minibond.

Minibonds were launched in the Italian market in 2012, under Decreto Sviluppo (D.L. 83/2012). The aim of the D.L. was to answer the restrictions of the traditional banking and financial system related to the crisis started in 2008. With minibonds, the Italian government aimed to reduce dependence on bank financing and create a system of alternative resources to support the competition and finance the Italian SMEs growth.

In addition to the Decreto Sviluppo, the reference regulations for minibonds includes the further integrations and changes of D.L. 179/2012 (“Decreto Sviluppo Bis”), D.L. 145/2013 (“Destinazione Italia” plan) and D.L. 91/2014 (“Decreto Competitività”), which include, inter alia, details on the tax treatment of interest by issuing companies.

Beyond the size, the difference from minibond and a traditional corporate bonds is in the features of the issuing company: with term minibond we typically refers to bonds issuing from Srl to SpA not listed. In the specific, by Decreto Destinazione Italia, the borrowers must be Italian companies not listed, different from banks and micro-companies, with revenues up to EUR 2M and least 10 employees.

Issuing bonds needs also qualitative requirements: minibonds are instrument of company’s growth, and are an opportunity of financing for the companies with an high potential, with solid financial statement, a detailed investments plan with a solid business plan, an expert management and good perspective of growth.

The ability to adopt best typical practises of listed companies, in terms of, for example, internal governance and external communication, is also essential.

Investing in minibond is not for everyone. The return on an investment in SMEs debt is higher and less vulnerable than other financial instruments, but the associated risks are not easy to manage. Analyzing SMEs is more complex, and often requires direct and deeper knowledge of that specific field.

For this reason, minibonds can only be subscribed by institutional investors (banks, insurance companies, pension fund, minibond funds, etc.) and qualified private investors, natural person who respect certain requirements in terms of assets and professional experience.

In the case of minibonds issued by Srl (Ltd), the regulation provides that they can only be subscribed by institutional investors.

They are both debt instruments but "minibonds" refers to bonds with a nominal amount up to EUR 50M issued by companies not listed on the stock exchange.