An excellent June for supply of new issues was not purely a European phenomenom. Issuers on both sides of the Atlantic joined in the fun last month. Conditions are firm and there appear to be few reasons why supply should slow.
But according to the vast majority of European syndicate managers famine might soon follow feast. They fear the upcoming introduction of the EU Prospectus Directive on July 1 was a reason why opportunistic issuers stirred from their torpor during May and June and that this supply might well dry up until the dust settles on the new regulations. The directive affects most public offerings of securities that trade on a regulated market.
It requires exacting levels of continuing disclosure, and new documentation even for recently updated MTN programmes.
There is a high level of ignorance about the new rulings among borrowers. At last month's Euromoney Global Borrowers & Investors Forum, only 5% of the audience at one seminar (three-quarters of whom were issuers) were able to claim to be well informed about the directive.
Cliff Dammers, until recently secretary general of the newly merged International Primary Market Association, says: "I think we are in wait-and-see mode. Lawyers and underwriters are finding it difficult to advise clients what to do."
Syndicate managers are virtually unanimous in their view that the first few weeks of the summer will be quiet as a consequence of the uncertainty. Market participants are looking for a straightforward way around the rules, and effectively it seems that something like the US Rule 144a market, for professional/institutional investors, will develop in Europe.
The Luxembourg Stock Exchange has introduced an alternative market, which although unregulated would provide a listing, thus satisfying institutional investors. However, it appears that Luxembourg is struggling to meet expectations with bureaucratic issues, slowing down progress with signing off programmes. The other possibilities are the London Stock Exchange, which is establishing a professional securities market and the Swiss Exchange, which has opened up to even allow English and US law in the documentation.