The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

German SME participation rights: Safety in numbers

Bankruptcy of Nici shows vulnerability of small German SME securitizations.


It is a familiar refrain from many a rating agency analyst: you cannot structure against fraud. And the insolvency for which German toy firm Nici AG filed on May 16 looks like it might be just that – director and founder Ottmar Pfaff has resigned amid rumours of accounting irregularities and unauthorized payments.

The development is bad news for two recent SME securitizations that reference the company: Commerzbank’s A199.5 million CB MezzCap transaction, which was signed in March, and Capital Efficiency Group (CEG)’s Preps 2004-2 SME CLO (which has already been hit by payment errors). The immediate impact was, however, far worse for CB MezzCap, whose D and E notes were immediately placed on Creditwatch Negative by Standard & Poor’s. The Commerzbank deal references 35 credits whereas the CEG deal has 67 and this serves to emphasize, if emphasis were needed, the importance of granularity in asset pools.

But CB MezzCap was not unusual in having just 35 names: Preps 2004-1 had 34 and HEAT Mezzanine 1-2005 via HSBC had just 32. All these deals are securitizations of participation rights (Genussrechte), the payment of advances under profit participation agreements.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree