The Euromoney global borrowers & investors forum was held in the London Hilton this week. It was well attended by over 500 delegates including asset and fund managers and private investors. The opening speeches were given by some prominent names in the banking world. Charles de Croisset, chairman of HSBC CCF, had some strong words for the national regulators while Crispin Southgate, from Merrill Lynch, spoke on the need for issuers to have equally good investor relations on the debt side as they do on the equity side. This theme was picked up with gusto after the coffee break. In the panel Credit where credit's due, one of the main messages was the importance of communication. Edgar Ancona, treasurer at Household International, noted the difficulty of getting the message across effectively due to the busy schedules of many investors. He said: "Issuers need to convey information in sound bites." Andy Longden, at British Telecom, thought European investors do not communicate as well as their US counterparts. He said: "Our experience is that US investors want to engage in direct communications and we are happy to do one-on-ones with them." Graham Wood, at Powergen, agreed and added that it is even more important in volatile markets. He said: "There have been several occasions recently when it wasn't a question of price, but whether you could fund at all. The markets have been volatile and sometimes borrowers have not been able to issue. In this case you should issue when you can, not when you have to." The speakers on the panel Mastering the mix had some cautionary things to say about the corporate bond market. Rory MacLeod, head of fixed income and currency at Baring Asset Management, started his bearish 15 minutes by saying: "The next few years will be much more a game of survival than anything else. The problem with corporate bonds is that they can crash. Whether you drive a Porsche or a Skoda, the first thing you do is put on your seat belt, and many pension funds have forgotten to do that recently." But not everyone agreed. Laurence Mutkin, head of fixed income strategy at Threadneedle Investments, said: "The fallout of the stock markets means certain portfolios became stressed, and the way to relieve this stress is to move into bonds." The audience was asked where it would invest money at the moment. Thirty-three percent said the European credit market would be their preferred investment. However, Mutkin said the recent polarization of many of the credit bands in the market meant the question was inaccurate and worthless. On day two the plenary addresses covered topics as diverse as the mergers and acquisitions markets, the cost of owning a CP programme in the US, geo-political risk and IPMA's solution that gives transparency and efficiency through technological innovation. The discussion entitled Issuing in a strategic market covered the shortening maturity profile, the need for good secondary market liquidity and the importance of derivatives. But the two dominant themes were dealer weaknesses and the meaning of optimal strategy. Speaking on the former, Frank Czichowski, at KfW, thought the pot system for issuing notes could be improved. He said: "I want to know who buys KfW bonds and at what levels, but I also want to know who is not buying our bonds and the reasons." Waltraut Burghardt, representing Osterreichische Kontrollbank, and Anne Leclerq, from the Belgian Debt Agency, agreed that the competition between dealers detracted from their service. Leclerq said: "I still have the impression that there is little coordination between the investment banks." But it is up to the issuer, ultimately, to ensure it makes the best use of its programme. Alisdair McDougall, head of capital markets at Abbey National, alluded to the paradoxical situation of being a busy issuer. He said: "We have found it is best to create a borrower franchise. A lot of investors don't know our name, so we try to see them frequently. But we also try to make sure they don't get bored of us by seeing too much of our paper." Ove Sten Jensen, head of government debt management at Danmarks Nationalbank, summed up a good strategy. He said: "You have to look at your strategy in the long term, but you must also be able to defend the individual transactions in the present. For us a focus on liquidity is better than an opportunistic approach."
June 21, 2002
