Bond costs to push firms to raise equity in 2009
By Olesya Dmitracova and Natalie Harrison
LONDON Dec 23 (Reuters) - The need to recapitalise and restructure will drive companies to raise more cash next year, and they will turn to equity capital markets (ECM) to do so as bonds remain a costly source of financing, bankers say.
Global bond issuance almost halved to $3.81 trillion this year, led mainly by a sharp drop in issuance by financial companies, Thomson Reuters data showed on Tuesday.
There is little chance of a strong pick-up in activity next year as spreads will widen further due to the deepening economic downturn, and more companies will struggle for access to to the bond market if they fail to renew revolver or syndicated loan agreements with their banks.
Global equity issuance, including initial public offerings, follow-ons and convertible bonds, dropped less severely than bond issuance, sliding 35 percent to $629 billion from 2007's record level.
"With limited debt financing available or at least debt at an attractive price, equity becomes a very logical additional source of financing," said Viswas Raghavan, head of international capital markets at JP Morgan (JPM.N: Cotización).
The bank came top for arranging equity issues and syndicated loans this year.
"Corporates will not want to take on too much leverage in a market where deleveraging is key," Raghavan added.