Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

Europe’s hybrid bond market rebound gathers steam, issuance set to exceed EUR 20bn in 2018

Hybrid bond issuance in Europe remains on track this year to reach its highest level since 2015 after a busy second quarter marked by a growing diversity of issuers, including real estate and consumer discretionary companies.

With first-half issuance of EUR 14.8bn falling just short of full-year issuance in 2016 and 2017, Scope Rating expects the placement of hybrid-bond issuance this year will likely surpass EUR 20bn.

Low interest rates and still buoyant equity markets remain powerful incentives for capital-intensive companies to issue the subordinated bonds, which blend the characteristics of debt and equity instruments, to help finance acquisitions and refinance maturing issues.

“Deal making is very much still underway in Europe, with corporate finance chiefs the most enthusiastic that they’ve been since 2015 about using hybrid bonds to fund expansion without jeopardising their credit ratings,” says Scope analyst Azza Chammem.

One caveat is the importance of bullish equity-market sentiment persisting for hybrid bonds to retain their appeal as a funding instrument while interest rates remain low, she says.

Several debutants from the real estate sector such as Swedish Klovern, Luxemburg based CPI Property Group or French-Dutch Unibail-Rodamco came to market with hybrid issues which have long been a preferred source of funding for power utilities and telecoms firms.

Scope has identified the following trends in the hybrid market segment in the first half:

  • H1 hybrid bond issuance reached of EUR 14.8bn, just short of yearly issuance in 2016 and 2017.
  • A handful of jumbo deals explain the rebound in the value of bonds placed.
  • Hybrid instruments are growing in importance again, approaching 5% of all debt capital market issues.
  • Real estate companies were prominent issuers, especially in the second quarter, accounting for 30% of H1 2018 hybrid issuance by volume, with a large portion of the proceeds used for the funding of enlarging the companies’ asset bases.
  • Companies keen to preserve borderline BBB investment-grade credit ratings remain the leading actors in the hybrid bond segment, particularly those which conduct extensive M&A.
  • More than EUR 5bn in hybrid debt issuance is in the pipeline judging by issues whose first call date is in H2 2018 and other envisaged big-ticket transactions.

For the full report, please click here.