Flush companies set to exchange new debt for old

By Alex Chambers

LONDON, Nov 4 (Reuters) - European companies have sold record volumes of debt this year but the market is currently so attractive that those with no pressing need for cash are using the opportunity to improve their debt profiles.

Bankers say healthy firms will increasingly seek to buy back debt and issue new longer-term paper debt via bond exchanges.

These liability management exercises currently allow borrowers to extend the maturity of their debt at relatively little cost.

British American Tobacco (BATS.L) has said it plans to buy back bonds from investors and issue new debt, while Swedish holding company Investor AB (INVEb.ST) is meeting bondholders for a similar exercise. [ID:nL490188] [ID.nLT268942]

"We will see more liability management trades," said Mark Lewellen, European head of corporate debt capital markets at Barclays Capital. "Borrowers want to take advantage of the market right now and this is a way for them to do it even if they do not need the funding."

DEALS DONE

Most European corporations that had needed to issue debt this year have already done so, and in record numbers. According to Thomson Reuters, Europe' companies have sold 275 billion euros ($408 billion), 45 percent up on the previous record year in 2001.