At the beginning of 1999, so the story goes, corporate Europe suddenly got religion about shareholder value. In the wake of the introduction of the euro, a wave of corporate restructuring swept the continent. Lured by growing investor appetite for credit - and with a little nudging from their bankers - Europe's companies plunged into the bond markets. The result was an explosion of corporate bond issuance.
The only problem with this version of history, according to new research by Merrill Lynch, is that it didn't happen. In a report introduced under the heading "The making of a myth", the Wrm's Wxed-income strategists claim that the increase in bond raising was not "the long awaited Big Bang in the eurozone market". In fact, there was only a small increase in net issuance by euroland industrial corporates.
How can this be? Figures from Capital Data Bondware show that eurozone corporate bond issuance increased more than fourfold to over $100 billion in 1999. One problem with these Wgures, says Merrill Lynch Wxed-income strategist César Molinas, is that they don't take account of redemptions.
To Wnd out what the true increase in outstandings was, he looked instead at Merrill Lynch's bond index system.