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Germany’s corporates are finally realising that in order to raise successful bond issues they need the ratings agencies on their side. For years they have relied on local investors and internal ratings and relationships. But unrated issuers are finding it increasingly hard to attract investors’s attention as more and more companies come to market with ratings in order to tap a hungry international investor base. Philip Moore reports.

Much has been said of the huge growth potential of the German corporate bond market. Some have even likened its growth to that of the internet. But in terms of volume of issuance, the German corporate bond market remains tiny compared with Germany's GDP. However, with the European M&A boom showing little sign of slowing down and with Germany's corporates leading the way in terms of restructuring - boosted by tax reforms concerning the reduction of capital gains tax on corporate restructuring - the key ingredients for a rapidly expanding market are finally in place.

Southern European competitive local exchange carrier Grapes Communications this week resisted pressure to increase the equity kicker on its unrated Eu200m debut bond issue, which was punchily priced on Wednesday with 3% of warrants and a 13.50% coupon. The Eu200m 10 year non-call five financing, led by Chase Manhattan and Merrill Lynch, was marketed with the 13.50% coupon and 2% to 3% of equity.

Southern European competitive local exchange carrier Grapes Communications this week resisted pressure to increase the equity kicker on its unrated Eu200m debut bond issue, which was punchily priced on Wednesday with 3% of warrants and a 13.50% coupon. The Eu200m 10 year non-call five financing, led by Chase Manhattan and Merrill Lynch, was marketed with the 13.50% coupon and 2% to 3% of equity.

The Chicago-based small business finance company Heller Financial issued $900m of three year global notes on Wednesday. About 60% of Heller's assets are in floating rate, and consequently roughly half the $900m was taken into floating rate, confirmed treasury officials at the borrower. At least three different shops were involved in the swap to floating, said swap market sources. It is Heller's practice to put its swaps out to the Street to capture the most aggressive pricing rather than simply awarding it to the leads as part of an all-in package, they added. Thus it is by no means certain that both joint leads Chase Securities and UBS Warburg took a hand in this transaction.

Ballooning swap spreads in the dollar markets and continued weakness in the euro weighed heavily on bond markets this week. US dollar swaps spreads widened sharply on Wednesday and yesterday (Thursday) in response to declining equity markets and nervousness ahead of today's (Friday) non-farm payroll data. But before the volatility set in, US financials Household, Heller and Associates Corp were able collectively to raise $3.9bn of global debt. Household's five year deal was doubled to $2bn and was still twice oversubscribed at the enlarged size. But the borrower had to pay considerably more than its usual targets to achieve successful execution. Some 20% of the deal was distributed internationally. Household's success encouraged Heller into the market on Tuesday, a day earlier than anticipated, and it too increased its three year deal, from $750m to $900m. Again, up to 20% of the deal was sold outside the US. Associates Corp chose the FRN market for its $1bn three year funding, paying a re-offer spread of 25bp over Libor against price talk of low to mid-20s. Joint lead manager CSFB estimated that 10% to 15% of the deal was placed in Europe and Asia. PNC, in contrast, focused on international distribution for its $750m FRN debut global bond, placing 85% in Europe and Asia. Vodafone's much anticipated short-dated transaction was launched by Lehman Brothers. The deal was larger than expected at $3.75bn, comprising $3bn of 19 month notes paying Libor plus 23bp, and $750m of 13 month notes paying plus 10bp. Phillips Petroleum will next week roadshow its maiden global bond via JP Morgan and Merrill Lynch with expected launch and pricing after the FOMC. The deal has been reduced in size, to $2bn from a reported $3bn, and two or three tranches between three and 10 years are anticipated. Moody's and S&P downgraded Phillips' senior debt two notches in March to Baa2 and BBB. National Australia Bank's $1.5bn two tranche subordinated bond is scheduled for launch next week via Merrill Lynch and Salomon Smith Barney. Ten year bullet and 10 non-call five structures are said to be involved. The euro hit a new low against the dollar yesterday (Thursday) of $0.8848, fuelling expectations that the ECB will have to raise rates to halt pressure on the currency - a very uncomfortable background for the host of transactions in the pipeline. DtA's global bond is expected to appear next week, a Eu1.5bn to Eu2bn 10 year led by Deutsche, HSBC and Morgan Stanley. A spread in the high 30s-40bp over Bunds is being mooted. French speciality chemicals company Rhodia will launch its Eu500m five or seven year deal next week via Bear Stearns and UBS Warburg after roadshows end today. EdF has awarded a mandate to Deutsche and SG to arrange a Eu500m to Eu1bn 10 year bond. Roadshows will start during the week of May 15. SNCF is expected to award a mandate for its Eu500m to Eu1bn 10 year issue shortly. Renault Credit International has appointed CCF and WestLB to lead manage a three year benchmark in the next three weeks. VNU roadshows next week before an issue of Eu700m of seven year bonds to be led by Deutsche and Schroder Salomon Smith Barney. German construction company Linde will roadshow from May 18 to 25 to publicise its euro benchmark bond to be led by Deutsche. And Carrefour is scheduled to launch its Eu1bn 10 year next week at Euribor plus 20bp area. Caixa Geral de Depositos should be in the market next week with up to Eu500m of fixed rate 10 year lower tier 2 debt through CSFB and UBS Warburg. On the FRN front, CFCMB has mandated DG Bank to bring a 10 year FRN of up to Eu300m. Sterling investors will be offered £250m of 15 year debt next week from debut borrower Smiths Industries. Barclays and UBS Warburg have the mandate from this A2 rated manufacturer of aerospace electronics, medical systems and specialist industrial products. The Halifax is also expected to launch its £1bn upper tier 2 perp non-call 15 deal next week via Goldman Sachs.

Following Kazakhstan's $350m seven year bond issue last week, two debut Kazakh bank deals are in competition - with similar $100m three year structures and back-to-back roadshows in Europe next week. Kazkommertzbank, the country's largest private sector bank with assets of KZT81bn at the end of last year, is looking for a $100m three year deal via lead managers ABN Amro and Merrill Lynch. Halyk Savings Bank, the dominant retail bank which is majority owned by the ministry of finance, is also looking for three year funds in a probably identical size through lead manager JP Morgan, which also led the sovereign issue with Deutsche Bank.

Argentina Salomon Smith Barney has been mandated to arrange a $100m five year structured term loan for electricity distributor Empresa Distribuidora Norte SA (EDENOR).

Bahrain Bank of Bahrain and Kuwait is proving popular in the co-arranger phase, where banks are asked for $10m take and hold tickets at 40bp.

* Trading will begin today (Friday) for PC-Ware, which has completed its Eu46.873m (including greenshoe) IPO. The DG Bank-led deal was 8.7 times oversubscribed and priced at the top of the Eu16-Eu19 range. The issue was divided roughly 50/50 between retail and institutional investors. Of the institutional sales, around two-thirds was sold in Germany with the rest sold elsewhere in Europe.

France * Books will open next week for the Eu100m IPO of Riber. The company - which manufactures machines used in the production of compound semiconductors - will list on the Nouveau Marché and on Nasdaq.