Magirus, the Germany-headquartered mid-range distie, last month increased its capital by €18m using "a new kind of financing instrument" arranged by the Capital Efficiency Group (CEG), of Switzerland.

Called PREPS (preferred pooled shares), the instrument is a type of profit participation capital - "subordinated capital which, due to its liability basis, assumes an intermediate position between genuine equity capital and borrowed capital".

"This form of financing offers a number of advantages," says Ulrich Schöttle, executive veep and CFO of Magirus AG. "The fact that this capitalisation measure reinforces the business equity capital of the company leads to a clear improvement in the balance sheet structure, credit standing, and rating. A welcome side-effect of the improved 'key figures' that we expect is a reduction in the remaining costs of credit. Furthermore, no collateral needs to be provided for this type of financing, which means the collateral remains available for other forms of financing and expands entrepreneurial freedom. Other advantages are the tax-deductible nature of the financing costs as well as the favorable terms in comparison with earlier financing options of this type." ®