European corporate bond issuance plummets

By Natalie Harrison

LONDON (Reuters) - After the worst start for European corporate bond issuance this decade, analysts are hoping that a spurt of new deals in the past week will kick-start the primary market in the second quarter.

European corporate bond activity totalled just $30.3 billion (15.2 billion pounds) from 71 issues in the first quarter of this year, down 53 percent from the $65 billion raised from 130 issues in the same period a year ago, according to preliminary data from Thomson Financial published on Friday.

The issuance is the slowest on record for the period 2000-2008, Thomson said.

But with a strong rally in credit spreads luring a raft of companies to the debt markets this week -- including benchmark deals from Dutch telecoms company KPN (KPN.AS: Quote, Profile, Research), French retailer Casino (CASP.PA: Quote, Profile, Research) and UK drinks group Diageo (DGE.L: Quote, Profile, Research) -- confidence is gaining that the tide may have already turned.

Only the KPN and Casino deals were included in the Thomson figures.

"Is it the start of a recovery? I hope so," said Sarwat Faruqui, head of corporate syndicate at Citigroup.

Citi was one of the lead managers for Greek telecoms group OTE's (OTEr.AT: Quote, Profile, Research) 2.1 billion euro 2-part bond deal launched in February. That was the biggest corporate bond from a European borrower so far this year, according to Thomson data.

"The KPN and Casino deals will give some comfort to the market. There are plenty of taps being done and I continue to get colour from accounts that they would like to buy high quality assets in euros," said Faruqui.