Debt issued by European companies heads for post-crisis high The amount of new debt - bonds and loans - issued by European companies is heading for a post-crisis high this year, according to Fitch. The rating agency said "lower-for-longer" funding costs were driving continued refinancing, and mergers and acquisitions activity was also heating up. The value of takeovers involving European companies was up 25 per cent to $1.04tn in the first three quarters, according to Dealogic, boosting demand for corporate funding. Notable activity this year includes mega deals in the telecommunications sector: the acquisition of SFR by Altice and Numericable; BSkyB's purchase of assets in Germany and Italy; and Orange's takeover of Jazztel. All of these used bond funding, either fully or partly. By contrast, Imperial Tobacco pre-funded its $7.1bn acquisition of parts of its US rival Lorillard in the loan market. "Mergers and acquisitions have really got going in Europe from a slow start," said Monica Insoll, head of credit market research for Europe and Asia-Pacific at Fitch. Once you start M&A, you have other companies follow - because when the status quo changes, others are obliged to move. Fitch said bottom-up analysis revealed that the economic importance of bonds was twice as high as indicated by new issuance volumes. Bonds have taken a rising share of corporate debt since the global financial crisis, now accounting for an average 83 per cent of the total debt of European corporates in developed markets. This ratio was higher than indicated by issuance volumes for bonds and loans because while borrowers receive the proceeds of a bond sale in full, loans are often agreed as a revolver facility that is only drawn upon for seasonal funding requirements. Total debt raised in the first nine moths of this year reached €881bn, up 10 per cent on the same stage last year. The full-year figure is set to exceed the annual amount of €1tn or so in the past five years and approach the all-time high of €1.5tn, reached in 2007. Syndicated loans bounced back in volume in the last two quarters and are up 23 per cent in the year to date. Bond issuance slowed in the third quarter - a common seasonal pattern - and was down 5 per cent, year on year. However, Fitch said the strong fourth-quarter bond pipeline could still put 2014 close to the €502bn annual record of 2009. "The marginally more positive economic outlook for the eurozone will support market activity while policy will remain accommodative," said the agency. Corporates in the eurozone periphery have also continued to issue bonds at a high rate, maintaining the bond ratio at about 40 per cent of total funding needs. This ratio is on a par with that for Germany, France and the UK. With banks in Spain and Italy still deleveraging, Fitch said bond investors were plugging an important gap. But Russian and Ukrainian corporates were suffering from political turmoil, severely reducing market access for both bonds and loans.