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Europe builds up for a rush

The European equity-linked market generated over e9 billion in convertible redemptions in January, which is almost a third of what is expected in maturities and puts through the whole of 2004.

This leaves large amounts of investor demand at a time when issuance is relatively slow. The rate of new issues is unlikely to pick up before the end of this month or March, so those issuers that move quickly are set to meet unusually strong demand.

Redemptions came from companies including Carrefour, France Télécom, Suez/AXA and Vivendi Universal on January 1. They were followed by Hutchison Whampoa/Vodafone and Suez/Fortis exchangeables among others.

French characteristic The prevalence of French firms is no coincidence; French issues often mature on January 1 because of regulations that mean investors receive the dividend for the calendar year in which they exercise their option to convert. The conversion period usually ends a few days before maturity, so a January 1 maturity brings a conversion period in late December. Investors then either converted their bonds in December 2003 to receive dividends in 2004, or they redeemed the bonds in January 2004 to receive the final coupon.

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