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Corporates have become the darlings of the European bond market. New issuance is running at record highs as investors look for paper yielding decent spreads at a time when government bond yields are low. The birth of the euro has created the opportunity for the corporate bond market to expand rapidly, providing a genuine alternative to the dollar for borrowers and a new asset class for investors. Several companies have already tapped the burgeoning investor demand by issuing large, liquid bonds in the new currency, and the queue of would-be issuers is lengthening all the time. But the syndicated loan market still provides powerful competition to the bond market. And many European companies are so cash rich that they have little need to visit the capital markets anytime soon. Will 1999 be the year when the European corporate bond market finally takes off? Or are investment bankers’ expectations running ahead of reality? Charles Olivier reports.

Eighteen months ago, high yield debt was one of the up and coming stars of the European capital markets. Issuance was doubling every year. Investors, bored of low interest rates, were flocking to bonds offering 10% or 11%. Virtually all of the deals were used to finance leveraged buy outs (LBOs) or build telephone networks, and there were very few double-B or single-B rated corporate issuers.

The birth of the euro has provided a powerful new boost for the already buoyant European equity-linked debt market, which is enjoying unprecedented growth and development. With interest rates low and stockmarkets high, a growing range of companies — from the blue chip and, increasingly, from the high growth sectors — are queuing up to issue equity-related finance and the investor base is expanding all the time. Now, with a single currency, deals can be done in size and with a frequency that is fast establishing European equity-linked debt as an asset class in its own right. And with the twin themes of corporate restructuring and shareholder value likely to dominate Europe’s financial markets for some while yet, the emergence of an increasingly deep, liquid and diverse equity-linked debt market in Europe looks like being a major feature in the development of the pan-European capital market. Rosie Shepperd reports.

Belgium The Eu595m non-recourse project financing funding the build out of KPN Orange, Belgium's third cellular network is to be signed on Monday.

Arranger Credit Suisse First Boston has received the first commitments from banks for its syndication of the £476m Coryton independent power project. Sell down should be completed by the end of next week. Banks have been invited to join the deal at three levels. Senior lead managers taking £20m receive participation fees of 15bp for tranche 'A' and 45bp for tranches 'B' and 'C'. Lead managers taking £15m receive participation fees of 12.5bp for tranche 'A' and 37.5bp for tranches 'B' and C'. Managers receive 10bp for tranche 'A' and 30bp for tranches 'B' and 'C' for takes of £10m.

Finland Finnair had quietly signed a $250m facility arranged by BNP (also the agent), Commerzbank, ING, Landesbank Kiel, and Paribas. The borrower is the Finnish national airline and is using the facility to buy Airbus aircraft, to be delivered over the next two years.

LEAD arrangers of the Hellenic Republic's $500m five year facility have received an excellent response from potential co-arrangers. They have been offered $25m on a take-and-hold basis, although one bank has already offered $50m. The arrangers are Bank of Tokyo-Mitsubishi (bookrunner), Barclays Capital (information memorandum), Bayerische Landesbank Girozentrale (facility agent), Bank of Montreal (documentation agent), Commerzbank (bookrunner) and Paribas (bookrunner).

India The $120m five year term loan for National Thermal Power has been well received. Standard Chartered Bank, BFCE and Crédit Agricole have already committed along with several Indian banks. Arrangers State Bank of India and BA Asia expect the deal to be oversubscribed.

EARLY indications that appetite for Rexam debt has been strong have prompted observers to speculate that the deal is benefiting from a quiet syndicated loan market. The Eu550m deal was launched into the market two weeks ago and many bankers had feared for its safety in retail. But the dearth of deals in the market since the beginning of the year has, say some bankers, increased the financing's profile.

KBC BANK Global Trade Finance Bank is waiting for one more reply before wrapping up a Eu65m floating rate note facility for the Agricultural Credit Bank of Jamaica (ACBJ). The tenor, at five years, is unusually long for a soft commodity deal. But the deal draws strength from the Jamaican commodity industry's 23 year track record of delivering its European Union sugar quota.

Peru ABN Amro Bank NV and BankBoston NA have been mandated to arrange a $200m four year facility for Telefónica del Perú. The borrower was last in the market in December last year when it received a $300m loan which was partly provided under a CAF umbrella.

Egypt National Bank of Egypt has mandated Citibank to co-ordinate its $150m facility.