Convertible cat and mouse game
Following a banner year for convertible bonds in 1999, bankers had hoped that the European corporate restructuring wave, capital gains tax changes in Germany, and benign economic conditions would spur the market to even greater heights in 2000. They have been disappointed by a light new issue calendar. However the market is hopeful of an upturn. Chris Cockerill reports
Until Hong Kong conglomerate Hutchison Whampoa burst onto the scene last month with the second-largest equity linked bond ever offered - a $3 billion issue exchangeable into the shares of Vodafone - bankers involved in the convertible debt markets had been especially idle throughout the holiday month of August. While executives in most sectors of the capital markets are usually grateful to slow down in the summer, after the traditionally hectic second quarter funding spree, convertible specialists were quite dispirited.
As one banker puts it: "August was a disaster. Issuers were afraid to put anything into the market because the investor base just wasn't there. The boss goes away and leaves junior in charge.