European buybacks - festive boost - FT.com Here is some seasonal cheer. In spite of temptingly low interest rates, European executives are not falling over themselves to buy back their companies" shares. There seems to be a similar buyback slowdown in the US, but the situation there may be driven by executives" desire to pay out cash as dividends before tax laws change. In the 12 months to end-November, European companies completed €45bn of share buybacks by value according to Standard & Poor's. That was down by almost one-third, in value terms, from the 2011 (calendar) figure. And it was almost two-thirds lower than the €110bn-plus of buybacks in 2007, at the top of the last credit cycle. But before raising too loud a cheer for European executives" flair, investors should ponder the reasons. The relatively lowly buyback figure does not stem from a reluctance to issue corporate debt securities. According to European Central Bank data, such issuance has accelerated sharply recently and is now close to record levels for non-financial corporations. In previous cycles, upticks in debt issuance were followed by a surge in buybacks. Since 2009, however, this correlation seems to have ended. Perhaps the most obvious explanation is that much of the debt issuance reflects refinancing activity, with managers still so wary about the economic outlook that they are also keeping additional funds to hand. According to Capital IQ data, cash balances (including short-term investments) at European corporates have risen 30 per cent to €700bn over the past four years. Of course there have been exceptions to the pattern: Switzerland-based Adecco, for example, funded a €400m share buyback with debt last autumn. But, in general, the big test for European corporates may be yet to come: when economic conditions finally improve, will they then find productive homes for their cash?