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European corporate debt: bonds share over 50% as bank lending falls, and flight to quality expected

Bonds accounted for over half of the new corporate debt funding in Europe in the first six months of 2013, which reached an overall total of EUR 495 billion. European corporates issued EUR 257 billion in bonds and Fitch estimate that bonds now account for more than 80 percent of European developed-market companies' total debt structure, up from below 70 percent in 2008.

According to Fitch, banks have not lent this little in Europe in over a decade. However, the rating agency projects that the bond trend has stalled for now. "While bond funding is likely to remain attractive relative to loans. This trend may moderate in the second half of the year," Fitch writes. Premiums are on the rise for new issues, the agency says. However, most European issuers are likely to find bond financing more attractive in terms of pricing and maturities compared to bank credit, according to the report. As a result, Fitch predicts a "flight to quality" in the second half of 2013, while costs for high-yield and emerging-market issuers will rise.

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Cash & Liquidity Management
Financing Short-Medium Term Deficits