* January volumes expected to hit three-year highs
* Demand pours into new trades
* M&A-led bond flurry expected
By Laura Benitez
LONDON, Jan 4 (IFR) - European companies capitalised on high
investor cash reserves and positive new year momentum on
Wednesday to fire out bonds while market conditions remain
Auto firms BMW, RCI and PSA Banque France are among those
raising financing this week, where year-to-date volumes are
expected to hit three-year highs.
"Investors have high cash balances and are looking for
credit opportunities, let's see how far this Trump-led rally can
continue for," one syndicate banker said.
Issuers are making the most of the strong market backdrop
and looking to avoid a repeat of 2016 when the European bond
market was disrupted several times as unexpected political turns
made investors nervous and caused pricing technicals to swing
out of favour.
Bankers and investors expect this year's political calendar
to spark a similar level of uncertainty and disruption, which
will see borrowers grab safe market windows while they can.
Brexit negotiations and France's presidential election are
some of the events expected to cause potential market volatility
in the coming months.
Today's deals have so far lured strong investor demand,
illustrated by an over 4bn order book for BMW Finance's dual
tranche four and 7.5-year benchmark deal.
Elsewhere, PSA Banque France, rated Baa2 (positive) by
Moody's, is marketing a 500mn no-grow three-year deal, while
auto spare parts manufacturer Valeo, rated Baa2/BBB, will price
a 500m six-year and attracted over 3bn of demand.
Germany-based chemicals group BASF is looking to lock in
more sterling financing to further capitalise on the Bank of
England's stimulus programme.
BASF, rated A1/A/A (Moody's/S&P/Scope), is marketing a long
eight-year sterling deal, after selling the BoE's first eligible
bond for its corporate bond buying programme at the close of
September last year.
Elsewhere, German healthcare group Fresenius kicked off
2017's jumbo M&A-linked bond supply on Tuesday, in what is
expected to be a busy year for the European market.
Fresenius is preparing to meet investors for the next stage
of financing its 5.76bn acquisition of Spain's biggest hospital
chain IDC Salud Holding (Quironsalud).
Bankers say that M&A financing could make a big impact on
January's overall bond volumes, while expecting the European
market to generally take a decent chunk out of a busy M&A
pipeline throughout 2017.
British American Tobacco is expected to tap the market for
M&A-linked supply, after it made a US$47bn bid for the rest of
US tobacco company Reynolds American it does not already own.
Investors expect most of the financing to be issued in the
US dollar market but say low costs could mean they issue a
reasonable portion in euros in early 2017.
Bayer is another candidate with a hotly anticipated
M&A-related deal, having said it will sell a mix of senior and
hybrid debt to help finance its US$66bn takeover of US seed
Bayer expects to close the transaction by the end of 2017.
This start of the year activity will give bond investors
comfort for the rest of the month, bankers say, while primary
issuance in other corners, namely the financials and SSA
markets, are also well underway for a busy January.
(Reporting By Laura Benitez)