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Revving Up the Bond

Hybrid bonds have typically been the province of financial companies, but other corporate issuers are beginning to see their attraction, especially when it comes to financing acquisitions

By Duncan Wood | Updated on March 01, 2007

The last 18 months have seen non-financial companies embracing Europe’s market for hybrid securities. Already a popular option with banks and insurers, a total of 15 non-financial companies also used the market to raise the equivalent of around $18 billion. The pace of issuance was only briefly slowed by market turmoil in May and June, and issuers as diverse as sports-car maker Porsche and family owned mail-order retailer Otto rubbed shoulders with the likes of Italian lottery operator Lottomatica and French construction giant Vinci. General Electric Co. even joined the party in September, issuing an innovative security with one tranche denominated in euros and one in British sterling.

By contrast, only eight non-financials have tapped the U.S. hybrid market for a total of roughly $4 billion over the same period, and all but two of them have been from the utility sector. This year should be a different story, say bankers, with issuance expected to increase and a wider range of companies looking at this new financing option, which is part bond, part equity.

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