* Liberty taps high-yield bond market, by-passes banks

* Bond financing for M&A deals set to rise

By Alex Chambers

LONDON, Nov 13 (Reuters) - Liberty Global (LBTYA.O: Quote, Profile, Research) has turned to the high-yield bond market to buy Unitymedia GmbH [UNTMDA.UL], in the first major European deal where high-yield bonds have usurped bank loans to fund an acquisition.

The German cable company itself is being used as an issuance vehicle to fund the purchase before the deal actually closes.

The acquisition's total consideration is $5.2 billion, consisting of equity at 2 billion euros ($3 billion) and existing debt of 1.5 billion euros.

UnityMedia had been poised to launch a 500 million euro initial public offering (IPO) -- arranged by UBS (UBSN.VX: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research) and Credit Suisse (CSGN.VX: Quote, Profile, Research) -- on Friday in what would have been Europe's first private equity-led offering. The financial sponsors' approach might be seen as dual-track but it is clear the planned IPO flushed out Liberty Global.

Unitymedia said Liberty Global had first approached the company three weeks ago, but a person familiar with the matter said Liberty had been interested for at least 18 months.