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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.

DEUTSCHE Bank is sole underwriting a bridge financing of Eu1bn for the Danish food products and packaging company Danisco. Bankers say it is the largest ever loan from the Nordic region to be underwritten by a single bank. The facility was launched into syndication on March 9 and around 10 banks should join the deal. A presentation for senior managers will be held next week.

CSFB HAS been appointed as global co-ordinator for the forthcoming sale of stock in Matav, the Hungarian national operator, after a particularly hard fought battle for the prestigious mandate. The deal should materialise in the second quarter of the year, if market conditions stabilise. Given the volatility surrounding both developed and emerging markets, the deal is likely to be executed on a swift timetable - possibly through an accelerated marketed offering to minimise the effect on Matav's outstanding shares.

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Global co-ordinators Goldman Sachs and JP Morgan will launch the sale of stock in Debitel next week. Debitel is the largest German telecoms service provider, with activities in mobile, fixed-line and internet services. The group will be spun off from the recently merged Daimler-Chrysler Services and the local retail group, Metro Holding. The two sellers are offering around 20% of Debitel's equity capital to international and local equity investors in a deal which will be completed by the end of March.

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Jumbo issuance leaped to Eu8bn this week as improved arbitrage opportunities prompted several mortgage banks to launch liquid transactions. The deals confirmed the changing nature of the jumbo primary market - many of the leading issuers of jumbos appear to have accepted the need for new issues to be bookbuilt with a syndicate of underwriters below the bookrunner level.

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.

Lucent Technologies made a hugely successful debut in the international bond markets this week when it launched a $1.36bn 30 year global bond via Bear Stearns. Everything had pointed to a successful transaction before launch. Lucent is at the cutting edge of the hottest sector in the international financial markets - telecommunications - and is one of the most popular credits in the US bond market.

The United Mexican States has offered to restructure the contentious $2.7bn emergency credit line it received in 1997, in a bid to sweeten its tainted relationships with the banking community. Last year the UMS outraged the 33 banks involved in the deal by drawing on the 18 month liquidity facility in circumstances the lenders did not feel justified the emergency tag placed on it.

Goldman Sachs is expected to launch a $2bn exchangeable bond for LVMH, the French luxury goods group, backed by shares in Diageo. The new capital may pave the way for a full bid for Gucci, the Italian fashion group with which the company is currently embroiled in a complex web of legal battles. The disputes revolve around a proposal from LVMH to establish a trading relationship with Gucci following the revalation that the French company had built up a 34.4% stake in Gucci.