More and more borrowers from Europe's periphery are waking up to the advantages of an active medium term note (MTN) and commercial paper (CP) programme. So much so, in fact, that they have come to dominate private market issuance this year: two Spanish issuers were the biggest borrowers of MTNs in the first quarter.
The figures show the importance that private markets now play in wholesale funding in general. And for those issuers most badly hit by the sovereign debt crisis, this market access could be seen as a lifeline.
Whether providing taps of public deals for investors seeking liquidity or finding a tenor that suits both investor and issuer perfectly, private placements offer issuers the ability to take advantage of small windows of opportunity — and often at reduced prices compared to the public markets.
The first quarter of 2012 has produced higher euro MTN volumes than at any time since the second quarter of 2008 — an impressive feat, given investors’ preference for more liquid, public deals in times of financial turbulence. More issuers would do well to consider entering the world of private placements and the opportunities it affords. Those that have are already seeing the benefit.
Spain's Instituto de Crédito Oficial and Santander were the largest issuers of MTNs during the first quarter of 2012, holding 8.6% of total third party MTN volume, according to the Dealogic Euro MTN Review for the period. In the SSA table, Ico held a whopping 12.6% share.
Dealogic’s Euro CP Review for the same time period paints a similarly busy picture for issuers in Europe’s periphery. Ireland and Italy take fourth and fifth place respectively in the sovereign CP issuers table. Portugal also makes the top 10. And these results were not down to a fall in broader issuance — the government/sovereign sector saw its outstanding levels climb by 24% year on year at the end of the quarter. The top 10 corporate CP issuer table is similarly littered with peripheral European names.
This week has seen a continuation of the spread volatility seen in peripheral government spreads last week. Amid this turbulence, even issuers well beyond the periphery would be unwise to ignore the importance of flexible funding strategies.