European Corporate Bond Market Reaches New Heights

European companies, particularly those in the telecoms sector, have been making significant strides in issuing corporate bonds to finance their expansion plans. The latest example is Mannesmann, which raised €3bn ($3.2bn) in the largest ever bond issue from a European company, exceeding the €2.5bn issued by Olivetti in 1998. This trend is expected to continue, with Olivetti's planned issue of floating-rate notes potentially reaching €18.6bn, contingent upon the success of its bid for Telecom Italia.

Key Takeaways:

Mannesmann's €3bn bond issue is the largest ever from a European company, surpassing Olivetti's €2.5bn issue in 1998.
The bond market has grown significantly, with European companies issuing €25.9bn in the first quarter of this year, almost matching the total for all of 1998.
The market is attracting new investors due to its growing depth and liquidity, particularly larger issues from companies like Pirelli, Fiat, and Telefonica.
Many of the larger transactions have been from telecoms companies, reflecting the intense merger and consolidation activity in the sector.
Olivetti's bond issue is contingent on the success of its €60.4bn bid for Telecom Italia, with the bond size potentially reaching €18.6bn.
Mannesmann's bonds were rated A1/A+ but will be downgraded if Olivetti's bid for Telecom Italia is successful.
The German group is committed to acquiring Infostrada and Omnitel if the deal goes through, and is also considering the acquisition of One2One, the UK mobile phone company.
The bonds were priced to yield 70 basis points over the January 2009 German government bond (bund), and were mainly placed with investors in Germany, France, Italy, and the UK.

Statistics:

European companies issued €25.9bn of bonds in the first quarter of this year, almost matching the total for all of 1998.
Mannesmann's bond issue raised €3bn ($3.2bn), with the bond size set to yield 70 basis points over the January 2009 German government bond (bund).
Olivetti's planned issue of floating-rate notes could reach €18.6bn, contingent upon the success of its bid for Telecom Italia.
The bond market is still relatively small compared to the US market, but its growing depth and liquidity are attracting new investors.
The telecoms sector is driving the growth of the corporate bond market, with companies like Olivetti and Mannesmann issuing large bonds to finance their expansion plans.

Sources: