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Will mandatories catch on in Europe?


France Telecom: led the mandatory
trend with an exchangeable that
optimized its return on the sell-off of
a stake in ST Microelectronics

Mandatory convertibles in Europe are finally trying to catch up with their American cousins. The few banks that tried to introduce them in Europe found it a thankless task, despite their being an established part of the US equity-linked market since 1989. In 2002, though, there were unexpected signs of life.

Depending on definitions, there were at least four European mandatory issues over the year. Before 2002 there had been just three in total. The takeoff has given some comfort to European equity-linked bankers, who have had few deals to celebrate in 2002 after the glut of issuance the previous year. Not everyone thinks these deals are going to keep coming much beyond 2003, though.

France Telecom led the trend with a e442.22 million exchangeable into ST Microelectronics, enabling it to sell its stake in the chipmaker more attractively than it could have done in the equity market. Swiss Life followed in early December with a three-year Sfr250 million ($173 million) mandatory linked to its rights issue.

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