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With the growing acceptance of hybrid securities by different investor bases, issuers are faced with the choice of which market they should tap. While euros remains the currency of choice for European companies, possibilities in dollars and sterling are growing, and both institutional and retail investors are viable options. This chapter will examine the pros and cons of the different markets.

Indications of rising US inflation this year sent ripples of alarm through the international debt markets. For Germany's triumvirate of top tier credits — KfW, Rentenbank and the Finanzagentur — this volatility had no negative effect on the demand for their benchmarks, showing that such turbulence can in fact create opportunities if the credit is good enough. Philip Moore reports.

Innovation has been a key feature of the market for corporate hybrid securities and this chapter will look at how issues have been tailored to deal with rating agency, tax, accounting and other considerations. It will highlight how structures have evolved as the market has matured to give issuers more flexibility in their choice of instrument.

Syndicated lending to German companies has ballooned this year — E.On's new Eu37bn acquisition finance deal is just the biggest of a family of giants. And lenders have something to smile about at last — the acquisition premium is back. But when the M&A carnival moves on, will Germany remain Europe's largest market? Darius Sokolov reports.

European bond investors' enthusiastic reaction to the growth of corporate hybrid capital has proved how open they are to new ideas, and how eager they are to buy new products that offer some extra yield.

The rise of hybrid capital — debt with characteristics of equity for purposes of capital treatment — has been one of the biggest stories in international debt capital markets in recent years. The market for corporate hybrid securities is only 17 months old, and yet it is becoming a favourite instrument of companies across Europe. Companies are acknowledging the financial flexibility and rating benefits that hybrids offer, to the extent that bankers and blue chip company treasurers are now regarding hybrid as a mainstream, not specialist, form of capital.

While 2006 will not go down as a vintage year for the German equity market, it will certainly not be remembered as a poor one. IPO volumes are up despite the sharp falls on global exchanges in May and June and confidence among investors and bankers is at its highest since 1999.

Sixteen years after reunification, the challenges faced by Germany's economy still dominate the lives of German people. While labour cost cutting is being successfully executed, high unemployment and tax increases due for 2007 are likely to hit consumer confidence and inflation. But a shift in the control of the corporate sector from banks to capital markets and the internationalisation of Germany's top companies has stimulated an exciting capital market that some say is entering a golden era. By Philip Moore.

Private equity is having a profound effect on Germany's economy, with the German venture capital association, BVK, estimating that it accounts for 8% of GDP. The threat of leveraged buy-outs is providing companies with the impetus to become acquisitive, driving M&A. And with the first sale of a Landesbank subsidiary to a US private equity firm this year, even the conservative public sector banks are acknowledging the opportunities that buy-outs present. The government is finding itself supporting a market that, up until recently, it derided. Philip Moore reports.

Last year's debacle at Allgemeine HypothekenBank Rheinboden shook confidence in the jumbo Pfandbrief, but the market quickly recovered and this year has traded tighter than ever. Jumbo volumes are nevertheless down, with private placements and foreign currency funding on the rise. However, as Neil Day reports, the long term future of the benchmark product appears safe.

The German corporate bond market used to be a sleepy backwater, but a revival in M&A has transformed it into one of the most vibrant segments of European fixed income. More companies are refinancing acquisitions and funding pension liabilities with hybrid capital, although there is a danger that the instrument is being over-marketed. Issuance from the Mittelstand has been limited as it does not need the debt capital the market had hoped it would, but Basel II may push more mid-cap companies towards the corporate debt market. Philip Moore reports on a full pipeline of deals.