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By Josie Cox
PARIS, Nov 28 (IFR) - European treasurers and bankers said
investment-grade corporate debt will likely remain the asset
class of choice in 2013 as investors continue to prefer it to
bank and sovereign bonds.
The corporate bond market will likely remain broadly
insulated from the European financial crisis, despite downbeat
macroeconomic headlines and ongoing fears over the availability
of funding in other asset classes, speakers at a Euromoney
Corporate Financing Forum in Paris said on Wednesday.
"Sovereigns and banks are no longer a safe haven," said Tron
Vormeland, vice president and head of corporate finance at
Statoil ASA, adding that corporates were therefore the natural
At the same time, conference participants also downplayed
talk of a bubble forming in the corporate bond market.
Fred Zorzi, global head of syndicate at BNP Paribas,
stressed that the market was still very rational, despite the
sheer volume of supply over the past 12 months.
Investors are very aware of where they are putting their
money and of the risks associated with the bonds that they do
buy, he added.
So far this year, European corporate bond issuance in euros
has reached EUR212bn, outpacing every year in the last decade
except 2009, when companies rushed to build cash buffers in the
wake of the sub-prime crisis in the U.S.
Despite the weight of supply this year, issuers remained
upbeat about future funding prospects in the bond market.
CHANGED CORPORATE FUNDING MODEL
Corporate funding models have changed dramatically over the
past two years as strict capital rules placed on banks have
reduced their capacity to lend, pushing corporates into the bond
That trend will continue, said Zorzi.
"There has been a lot of talk about liquidity and regulation
but let's not forget that in Europe at least, the market is
still growing and everyone is still learning," Zorzi said.
"If we look to the United States, we can see that this type
of model is sustainable. Despite a lot of uncertainty, we have
seen really good performance in the bond market over the last
Several other treasurers emphasised the importance of
weighing risks and approaching the right investors.
Emmanuel Rapin, group treasurer at unrated French media
conglomerate Lagardere, highlighted the importance of niche
markets and how they can contribute to the efficient
diversification of funding operations.
"It's also about trust," he said, explaining that in the
current market environment, characterised by volatility and
headline risk, winning investor trust was key.
Lagardere printed a 4.125% EUR500m five-year bond in
mid-October that garnered a book of EUR4.5bn, demonstrating that
investor hunger for yield is helping even less known issuers and
unrated names fund in the bond market at attractive levels.
Since pricing at mid-swaps plus 325bp, that bond has
tightened by 60bp to trade around 265bp over.
Other lower rated issuers, including Fiat Finance & Trade
and Italian gaming company Lottomatica, have also proved this
week that investors are willing to move down the credit curve.
Fiat F&T, rated B1/BB-/BB, attracted a EUR1.1bn book for a
EUR400m tap on Monday, while Lottomatica, rated Baa3/BBB-, is
set to price a EUR500m long seven-year bond on Wednesday with no
concession on the back of a EUR5.5bn order book.
(Reporting by Josie Cox, additional reporting by Natalie
Harrison in London, editing by Alex Chambers and Julian Baker)