Investing in Private Placements

The term private placement can refer to a number of different instruments in different markets, however, we define a private placement as an unlisted capital market debt instrument, which usually has a fixed rate of interest and is for a fixed period, lent to companies by institutional investors, such as pension funds and insurance companies. By their nature, private placements tend to be illiquid, which promotes a longer-term relationship between issuer and investor, and typically contain covenants, which provide additional comfort to investors. Issuers can be either rated or unrated, as there is no requirement to have a rating from an agency in order to gain access to this market.

As the market has grown, documentation has become more standardised, with market participants joining together to draw up the Model Form Note Purchase Agreement, which has become the benchmark for the private placement market. This has greatly improved the documentation process making it quicker, easier and more consistent for all participants. Despite this degree of standardisation, the Note Purchase Agreement remains flexible enough to suit each individual issuer's requirements and to address investor concerns.