Table of Contents

Executive summary

  • Identifying new opportunities
  • About the report

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C01 Interest rates and the global economy

  • Introduction
  • Outlook for growth
    • Effect on wages
  • Risk and financial stability
    • Generous liquidity and accommodation – but for how long?
    • Solvency, not liquidity, is the longer-term risk
  • Outlook for central banks
  • Outlook for currencies
  • Corporate funding
  • Conclusion

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C02 The yield curve

David Keeble, Executive Director/Global Head of Interest Rates Strategy, Calyon

  • Market volatility
  • The slope of the yield curve
    • Liquidity constraints
  • Pricing issues
  • Prospects for issuance

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C03 Funding in a crunch

Hans Peter Lorenzen, Director, European Credit Products Strategy Team, Citibank

  • Anatomy of a crisis
    • A systemic unwind of leverage Central banks to the rescue?
  • Assessing bank funding and lending
    • The securitisation problem
    • Unfunded commitments
    • Will regulators reassess capital ratios?
    • Less lending, still lots of funding
  • Will non-financials feel the pinch?
    • The return of disintermediation
  • Conclusion – funding in a crunch

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C04 Investment grade bonds: syndication outlook

Jean-Francios Mazaud, Head of Debt Capital Markets & Thomas Minoletti, Associate, Société Générale Corporate & Investment Banking

  • Introduction
  • Primary market activity throughout the crisis
  • Secondary market activity throughout the crisis
  • Executing benchmark transactions in volatile markets
  • Investor dynamics in volatile markets
  • Pricing benchmark transactions in a volatile market
  • Potential opportunities in a volatile market
  • The outlook for the investment grade bond market
  • Conclusion

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C05 European high-yield market a pause before another surge

Oleksiy Soroka, Senior Credit Analyst, High Yield Consumer, Industrials, BNP Paribas

  • Introduction
    • Europe catches on
    • Damaging effects of the burst telecom bubble
    • The ‘Belle Epoque’
  • Market changes
  • CASE STUDY: Alliance Boots – a classic top-of-the-market transaction
    • The sub-prime crisis
  • Market stasis
  • Default rates
  • Recovery prospects
    • Economy: the swing factor
    • Long pause before another surge

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C06 Corporate default rates and ratings implications

Kenneth Emery, Senior Vice President and Director of Corporate Default Research in the Credit Policy Research Group, Moody’s Investor Service

  • Introduction
  • Prospects for default rates
    • Mitigating factors
    • Corporate health
    • Near-term corporate refunding risks
  • Risk factors in high-yield default
    • Weakening issuer liquidity
  • Speculative grade liquidity ratings explained
    • Refunding risk
    • Market turbulence
  • Rating actions, reviews and outlooks reflect worsening credit quality

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C07 Syndicated loans

Rebecca Manuel, Managing Director, Head of European Corporate and Structured Loan Syndicate, The Royal Bank of Scotland

  • Introduction
  • Loan market overview
    • EMEA region
  • Syndicated loan issuer classes
    • General corporate
    • Acquisition finance
    • Project finance
    • Other structured finance
  • The credit crunch
  • 2008 review and outlook

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C08 Leveraged loans

Ruth McGavin, Associate, Leveraged Commentary and Data, Standard & Poors

  • Market background
  • European market growth
    • Out of balance
    • Boom-time madness
  • Current state of the market
  • Prospects and challenges

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C09 Opportunities and challenges for corporates in the post- credit crunch securitisation markets

Conor Downey, Partner, London Capital Markets Group, Cadwalader, Wickersham and Taft

  • Past routes to finance
  • The current situation
  • Future development drivers
    • Back to basics
    • New investors
  • What deals will be available to corporates?
  • Conclusion

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C10 Structured notes in the private placement market

Sylvia Ewald, Head, European Medium Term Notes, Morgan Stanley

  • Introduction
  • Specifications of private placements
    • Issuance under standalone documentation
    • Issuance under debt issuance programmes
  • Developments and trends in the private placement market
  • Anatomy of private placements
  • Structured notes
  • Rationale for structured notes issuance
    • The dealer’s role
    • Benefits for issuers
  • Dealing with the credit crunch
  • Types of structured notes
    • Interest rate linked
    • Equity linked
    • Currency linked
    • Credit linked
    • Inflation linked
    • Commodity linked
  • Focus: The range accrual note
  • Secondary market
  • Conclusion

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C11 Hybrid securities: low cost equity to support your strategic objectives

Steve Sahara, Managing Director and Global Head of Hybrid Capital Structuring & Annabel Daws-Chew, Associate, Calyon

  • Introduction
  • Hybrid capital market overview
    • The preferred stock paradigm
  • Drivers for issuing hybrid capital securities
    • Corporate hybrid issuers
      • Michelin
      • Linde
      • Südzucker, Vattenfall and DONG
      • Henkel
      • Porsche
      • Glencore
      • CEMEX
      • Rexam
      • Voestalpine
      • Deutsche Boerse
  • Structural considerations for corporate sector hybrids
    • Legal/tax considerations
    • Accounting considerations
    • Rating agency considerations
  • Future of the corporate hybrid market
    • Tax, accounting and rating agency
    • Expansion of the issuer pool
  • Conclusion
  • Appendix

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C12 Convertible bonds: a financing solution for all?

Simon Roue, Head of Equity-linked Origination for EMEA and Asia, Strategic Equity Transactions Group, Deutsche Bank

  • Issuance capacity
  • Issuance flexibility
    • The ‘equity financing’ niche play
    • A potential alternative to debt
    • If it works for corporates, it can work for governments
  • Convertible bonds – the key components
    • Convertibility into shares
      • Future dilution or dilution today?
      • Shareholder approval
      • Equity volatility
      • Investor behaviour and share price impact
    • Convertibles compared with the debt markets
      • Development of spreads during the bull run
      • Current debt market conditions
    • The unique investor base
      • Hedge funds
      • Outright investors
    • Remaining technicalities
      • Accounting
      • Tax
  • Conclusion – the current market outlook

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C13 Issuer 1: KPN

Marielle Vogt, Senior Advisor, Matthew House, Associate & Joost Freijzer, Associate, Corporate Finance, KPN

  • About KPN
  • Financing framework
  • Funding before the credit crunch
  • Funding during the credit crunch
  • Funding in 2008
  • Funding going forward

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C14 Issuer 2: Eksportfinans

Oliver Siem, Executive Vice President and Director of the Treasury Department, Martine Mills Hagen, Senior Vice President and Head of Funding & Kristine Bastoe Sund, MTN Analyst, Funding Department Eksportfinans

  • Introduction
  • Background
  • Funding
  • Coping with the sub-prime fallout

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LIST OF TABLES AND FIGURES

  • T3.1: High-grade issuance forecast fixed and FRN (local currency, bn)
  • T3.2: European banks – return vs.leverage 1996 & 2007
  • T3.3: Financial issuance forecasts (local currency, bn)
  • T3.4: Financial issuance forecasts (local currency, bn)
  • T6.1: Rating actions, reviews and outlooks as of 31 March 2008 (as a percentage of rated issuers in each sector)
  • T6.2: Rating actions, reviews and outlooks as of 31 March 2008 (as a percentage of rated issuers in each region)
  • T6.3: Rating actions, reviews and outlooks as of 31 March 2008 (as a percentage of rated issuers in rating category)
  • T7.1: Top bookrunners of global syndicated loans, 2007 (US$bn, %)
  • T7.2: Top bookrunners of EMEA syndicated loans, 2007 (US$bn, %)
  • T11.1: The preferred stock paradigm
  • T11.2: Issuance rationale for select corporate hybrid securities
  • T11.3: Summary corporate hybrid instrument terms
  • F1.1: US confidence vs. 5-year inflation forecasts, 1990–2006
  • F1.2: Eurozone – PMI composite vs. real GDP, 1999–H1 2008
  • F1.3: Local steel scrap prices, Jan 2006–Feb 2008 (US$/t)
  • F1.4: US petrol prices vs. TIPS 2032, Mar 2007–Jun 2008
  • F1.5: US and eurozone inflation, 2003–09F (%)
  • F1.6: Belgian inflation, 1984–H1 2008 (%)
  • F1.7: US bank assets / nominal GDP, 1973–Q1 2008-07-08
  • F1.8: US bank stocks, Jan 2007–Jul 2008
  • F1.9: Fed Funds target and measures of neutral fed funds, 1960–H1 2008
  • F1.10: Per person contribution to quarterly US GDP growth, 1977–2007 (4-qtr mov ave)
  • F1.11: US retail sales, less motors and petrol, 1993–H1 2008 (adjusted 3m/3m, annualised %)
  • F1.12: US$/€ comparison, 1995–2009F
  • F1.13: Interest rate differential and US$/€, 2003–H1 2008
  • F1.14: Corporate liquidity, 2005–Q1 2008, (%)
  • F1.15: Corporate margins, 2005–Q1 2008 (%)
  • F1.16: Impacts on payments, 2005–Q1 2008 (%)
  • F1.17: Inflation comparisons, 1962–2007 (%)
  • F1.18: Growth volatility, 1962–2007 (%)
  • F2.1: 10Y US Treasury yield (%)
  • F2.2: Structural slopes of the yield curve (bp)
  • F2.3: 3-month T-bill, May 2007–May 2008 (%)
  • F2.4: 10Y10Y–5Y5Y US and Europe (bp)
  • F3.1: Total bank assets, 1999–2007 (2003=100)
  • F3.2: Global syndicated loan issuance by type, 1980–2008 (US$bn)
  • F3.3: Net bond issuance, 1999–2007 (€bn)
  • F3.4: Loan share of total corporate financing – Europe, 2000–07 (%)
  • F3.5: Borrowing of selected large European banks, 1999–2007 (€trn)
  • F3.6: Undrawn facilities signed by size, 1980–2008 (US$)
  • F3.7: The off-balance sheet conduit model
  • F3.8: US commercial paper outstanding, 2001–08 (US$trn)
  • F3.9: European securitised products issuance, 2005–08 (€bn)
  • F3.10: Total assets of selected US and EU banks, 2005–08 (2003=100)
  • F3.11: 3-mth Libor – 3-mth OIS by currency, Dec 2006–Apr 2008 (%)
  • F3.12: Financial issuance – total gross by month (€bn)
  • F3.13: Loans to large enterprises, 1990–2007 (YoY growth, %)
  • F3.14: Global outstanding undrawn loans, 1995–2007 (US$bn)
  • F3.15: European banks – tangible equity to reported assets, 1995–2007E (%)
  • F3.16: Financial issuance and redemptions, 2000–08F (€bn)
  • F3.17: Financial issuance and redemptions, 2000–08F (€bn)
  • F3.18: EBITDA to net debt, US and Europe, 1996–2007 (%)
  • F3.19: Short-term debt, percentage of total debt, 1996–2007
  • F3.20: Cash and near-cash items, percent of short-term debt, 1996–2007
  • F3.21: US non-financial funds in and out, 1980–2007 (percentage of GDP)
  • F3.22: European corporate cash flow expenditures, 1996–2007 (percentage of operating cash flow)
  • F3.23: Global monthly M&A volumes w. 3-mth MA, Nov 2003–Nov 2007 (US$bn)
  • F3.24: Corporate bond yield vs. inverted P/E ratio, 1998–2007 (%)
  • F3.25: Global M&A, 1990–2007 (country as acquirer or target, US$trn)
  • F3.26: Net percentage of banks tightening standards, 1990–2007
  • F3.27: Lending standards vs. net increase in corporate liabilities, loans, 1990–2007 (US$bn)
  • F3.28: Monthly drawn loan issuance, 1995–2008 (US$bn)
  • F3.29: Lending standards vs. net increase in corporate liabilities, loans, 1990–2007 (US$bn)
  • F3.30: Non-financial issuance and redemptions in Euros 2000–08F (€bn)
  • F3.31: Non-financial issuance and redemptions in Dollars 2000–08F (US$bn)
  • F4.1: Corporate investment grade bond issuance (US$bn, (%)
  • F4.2: Evolution of 10y benchmark yields, Jun 2007–May 2008 (%)
  • F4.3: Euro AA 7y fixed rate borrowing costs, Jun 2007–May 2008 (%)
  • F4.4: Euro A 7y fixed rate borrowing costs, Jun 2007–May 2008 (%)
  • F4.5: Euro BBB 7y fixed rate borrowing costs, Jun 2007–May 2008 (%)
  • F4.6: Investment grade spreads, Jun 2007–May 2008 (bp)
  • F4.7: Investment grade redemptions, 2005–08 (US$bn equiv)
  • F4.8: Global M&A volumes, 2005–Q1 2008 (US$bn equiv)
  • F5.1: European high-yield bond market returns, 1998–H1 2008 (%)
  • F5.2: European currency monthly bond issuance, 2006, 2007 (US$bn)
  • F5.3: Global speculative grade default rates, 1970–2007 (%)
  • F6.1: Global speculative-grade default rate, 1998–2008F (%)
  • F6.2: Speculative-grade default rates and high yield bond spreads, Mar 1989–Mar 2008 (%, bp)
  • F6.3: Non-financial corporate balance sheets, 1980–2006
  • F6.4: CDS vs. EDFs for current speculative-grade issuers, 1999–2008
  • F6.5: Maturing speculative-grade debt, 2004–09 (US$bn)
  • F6.6: SGL portfolio composition, Q3 2002–Q1 2008
  • F6.7: Maturing speculative-grade debt, 2008–10 (US$bn)
  • F6.8: Covenant cushion, by rating category (%)
  • F6.9: Probability of a covenant breach, by rating category (%)
  • F7.1: Global capital markets volumes, 2007 (US$bn)
  • F7.2: Global loan volumes by region, 1995–2007 (US$bn)
  • F7.3: EMEA loan volumes by region, 1995–2007 (US$bn)
  • F7.4: Issuance by geography 2000, 2007 (US$bn)
  • F7.5: Global quarterly volumes Q1 2007–Q1 2008 (US$bn)
  • F7.6: EMEA – loan market volume, Q1 2006–Q1 2008 (US$bn)
  • F7.7: Loan multi-year drawn pricing, Jan 2002–Jan 2008 (L+bp)
  • F7.8: EMEA use of proceeds Q1 2007–Q1 2008 (US$bn)
  • F7.9: EMEA acquisition related vs. LBOs Q1 2007–Q1 2008 (US$bn)
  • F8.1: Annual senior loan volume, 1998–Q1 2008 (€bn)
  • F8.2: Primary market by broad investor type, 1999–Q1 2008 (%)
  • F8.3: Weighted average new issue spreads – pro rata vs. institutional, 1997–Q1 2008
  • F8.4: Spread per unit of leverage – Europe vs. US, Q4 1998– Q1 2008 (bp)
  • F10.1: Corporate private placement issuance, Jun 2007–Jun 2008 (US$m, %)
  • F10.2: Private MTN issuance by currency, Q1 2008 (%)
  • F10.3: Issuance volume, 2000–Q1 2008 (€bn)
  • F10.4: Private EMTN volume evolution by S&P rating, Q1 2005–Q1 2008 (€bn)
  • F10.5: Cash flows of a structured bond and swap transaction
  • F10.6: Structured notes by asset class, Jun 2007–Jun 2008 (US$m, %)
  • F11.1: Growth of next generation hybrid issuance, 2003–Jun 2008 (€m)
  • F11.2: Corporate issuers (sectors/ratings) benefiting from hybrid instruments
  • F11.3: WACC calculation – common equity vs. hybrid debt (%)
  • F11.4: Primary technical foundations for structuring a hybrid security
  • F12.1: EMEA convertible bond issuance, Jan–May 2008 (US$bn)
  • F12.2: Supply/demand dynamic for EMEA convertible paper, 2004–May 2008 (US$bn)
  • F12.3: Historic EMEA convertible issuance, 2002–May 2008 (US$bn)
  • F12.4: Convertible mechanics
  • F12.5: European volatility (VStoxx), Jan 2007–Jun 2008 (%)
  • F12.6: Evolution of convertible delta
  • F12.7: Credit spread development over the cycle, Jan 2005–May 2008 (bp)
  • F13.1: KPN debt, Q1 2007–Q1 2008 (€bn)
  • F13.2: KPN financing policy, Q1 2007–Q1 2008
  • F13.3: KPN 5Y CDS vs. iTraxx Xover 5Y, May 2007–May 2008 (bp)
  • F13.4: KPN debt redemption profile, end-2007 (€bn)
  • F14.1: Eksportfinans total lending, 2003–2007
  • F14.2: US MTN vs. non-US MTN, 2003–11 Jun 2008 (US$m equiv)
  • F14.3: Eksportfinans total funding and no. of currencies, 2003–11 Jun 2008 (US$m equiv)
  • F14.4: Eksportfinans investor geography distribution, 2003–11 Jun 2008 (US$m equiv)

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These contents were correct at time of going to print but may change.