83 above the rate of the German State to 10 years

For two weeks, the flow of business debt emissions found a steady pace. Is marking the receipt, hybrid paper (considered both the debt and actions) are returning, after having been virtually banned since the financial crisis. For the investor, they are indeed higher than a traditional duty risk. Tuesday, Suez Environment was successfully in a program of this type for EUR 750 million, with an initial coupon of 4.82. The demand has been more than 8 times higher than the offer. The French group was preceded late last week by Scottish & Southern Energy, welcomed also by investors. The German RWE should jump in their wake.

The primary market bond thus takes a new step in its reopening after the re-emergence of poorly graded debt ("high yield") and the debt of financial institutions, two segments which are also very active. "Emissions of the speculative category, such as those of Gecina, Continental or Owen Illinois - this operation has been over-subscribed 7 times - go very well", said Badr el-Moutawakil, at Natixis. These success contributes to the increase in volumes of "high yield" bonds, which will beat records this year. The Fitch Agency estimated that they will reach approximately 50 billion euros in Europe, so that more transmitters of this type to re-finance loans by appeal to the market. "This is the case of German SMEs, previously very dependent on banks, note Rodolfo Caceres, in Tikehau IM." In General, there is in Europe a structural migration towards the financing of market.

Pay less

The animation of the re-entry is favoured by the low rates. German 10-year performance has recently hit the lowest level in its history. Due to high demand, the cost of financing of private borrowers fall also. After the index associate of Markit, they lie on average at 3.5 (on the average of the maturities). Total for example lifted 12 years debt by offering a coupon of 3.125, i.e. only 83 basis points (0.83) above the rate of the German State to 10 years. Last year, the oil Group had paid a coupon 5,125 on bonds to 14 years. Some companies are taking advantage to emit on the very long term: EDF comes to place titles in 40 years in Sterling, with a coupon of 5,125 and Rabobank of the paper to 100 years, in dollars, at a rate of 5.8!

The fall of the costs of funding is not that well noted names. The example of Continental, in the speculative category, is eloquent: tire specialist raised EUR 1 billion in securities due 2017 at a rate of 7.5 this month, while it had issued bonds maturing 2015-8.5 in July. In two months, the company pays therefore cheaper while offering a longer maturity.

Companies have also not need to offer particularly attractive emission allowances. Renault merely propose 5 basis points more than the rate of titles already in circulation. "The level of premium was instead of the order of 10 to 20 basis points at the height of concerns over sovereign debt this year," said analyst of Natixis.

Given these conditions, companies are becoming more opportunistic and emit not only for immediate needs. Some are for example exchanges of securities: the company buys back bonds that it has previously issued and used for coupons higher than those of the time. Iberdrola recently raised 600 million euros of securities, in part to perform this type of Exchange. Conditions may also encourage them to take the advance on the needs of refinancing in the coming years. However, contrary to what is observed in the United States, European companies do not yet really appeal to markets to fund merger-acquisition operations or the payment of dividends to shareholders.