European Corporates: Tab into the US or Asian Investor Pools
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13 April 2012Joséphine de Chazournes
European corporates have found a new way to finance themselves: issuing bonds on regulated markets. Indeed it is reported that during the first quarter of 2012 European Corporate Bond Issues have over-passed European Bank loans. Historically European corporates would typically have used market funding for only 9% of their debt, vs. their US counterparts at 64% of their debt coming from bonds. The latest ECB LTRO will realistically not have any impact on real economy financing so the Debt Capital Markets team of investment banks can stay on the road to get the corporates in the door. Unfortunately though, if European institutions are able to cherry-pick the issues that provide good risk/return profiles, the retail investors are still looking for safe heaven investments. Currently, even in Germany, the retail tends to prefer to invest in negative yielding government bonds than on the corporate market. So, for investor pools, European corporates have to look further: if they already comply with SEC reporting rules, they can issue directly on the US market in USD with a prospectus. About 50% of issues done in USD are now not from US company vs. about 30% in previous years. They could also do a US private placement (144A) without having to do a prospectus, by selling shares to only a specific set of qualified investors. For corporates aiming at growing in Asia/China, the so-called “Dim-sum bonds”, issued in Yuan in Honk Kong or London, could also be an alternative to issuing in Euro. Many banks and asset managers are investing in this business but it still only nascent compared to the USD or Euro issues. Foreign investor pools will also be able to invest in the Yen market. This week ING has become the first bank to register a programme of bond issuance under a new system designed to make the domestic Yen market accessible to non-Japanese borrowers. Until European banks and investors get better…
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