European corporate bonds flourishing

February 22, 2012

A new set of data from Thomson Reuters sheds light on blossoming European corporate bond activity.

Here are the main findings:

— European corporate debt totals $75 billion so far during 2012, up 83% over the same period in 2011, and a year-to-date total only surpassed by 2009 in the last decade.  January 2012 saw $48 billion raised, the strongest month since March 2011 ($50 billion).  With a week to go before the end of the month, February issuance is already up 68% over February 2011.

— German, UK and French borrowers dominate the European corporate bond market, accounting for 69% of all issuance. The Energy & Power and Industrials sectors are particularly prevalent in Europe, accounting for over 44% of the market.

— New banking regulations arising from Basel III are driving borrowers away from the loans market, and into the bonds markets. Borrowers are also favouring bonds over loans for funding because of favourable coupons, a quicker deal closing process and good liquidity in the bond markets.  Deals have been regularly oversubscribed and market sentiment is good.

Global brewer SABMiller’s financial subsidiary SABMiller Holdings tops the issuance league with its $7 billion 2022 bond which has a coupon of 3.75 percent. The company is using the proceeds to repay part of the bank borrowing taken on for the purchase of Australian brewer Foster’s last year.

For more on corporate bonds, click on the following:

Credit rally: bubbles or not?
Calling CCCs
Corporate bonds in sweet spot
Corporate debt to get boost from ECB’s new cheap loans
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