Europe

Conditions have rarely been sweeter for European borrowers seeking to diversify their funding sources. Europe’s dominant private debt markets for investment grade issuers, the US private placement market and the Schuldschein, are thriving, and agents in both are on the hunt for new borrowers. Their search will better if, as expected, public bond markets have a tough 2019. Silas Brown reports.

Mergers and acquisitions in Europe are back. But what loans bankers have long hoped would be great news for their businesses is in most cases turning out to be a far less lucrative development, as companies increasingly turn to smaller banking groups to finance their acquisition plans. By Michael Turner.

European Union member states are set to soothe banks’ concerns about having too tight a window to change their risk-free euro reference rate from Eonia, with a postponement of the transition to Ester due on Wednesday.

Rising interest rates in the US have created a roaring market for convertible bonds. Europe’s barren market has been put to shame — it risks being the driest year for two decades. Going into 2019, Europe is likely to remain in the shade of the US, but there are hopes of an issuance rebound — that is if interest rates ever start to rise. Aidan Gregory reports.

Grainger plc, the UK residential property manager, has completed its £346m rights issue to finance its full takeover of Grip Reit, having received a high take-up from its shareholders.

Germany has increased its funding target next year to the highest level since 2014 in order to partially refinance maturing debt from its winding-up agency, FMS Wertmanagement, for the first time, the sovereign announced on Tuesday.

The UK’s CityFibre has signed a £1.12bn debt package from seven banks, as the Goldman Sachs-linked fibre broadband infrastructure provider rolls out its nationwide competition against incumbent firms BT and Virgin Media.

The European high yield bond market is storing December’s pipeline for January, but several investors warned that demand may still be thin in the new year and that borrowers should pace their plans for issuance.

Capital instruments issued by financial institutions under previous regulatory regimes was a topic of contention in several instances this year. With regulators set to lay down further positions, legacy capital will remain on the agenda in 2019.

Falling global stock markets and and billions of dollars of equity fund redemptions mean ECM bankers will have to be careful with what deals they bring when markets reopen in January.

Supply of MREL-eligible debt is expected to boom in 2019, when all European banks will finally be in a position to issue senior bonds that count towards the requirement. But a full range of issuers will be competing to issue these new and more expensive instruments at a time when markets are becoming increasingly volatile. Stand by for pulled deals and creative funding strategies.

As central banks retreat from public markets, spreads are widening in dollars and euros, and cross-currency basis swaps are improving for international borrowers, Swiss bankers believe the good times might be returning to a market once known the world over for diversification and arbitrage.