Dialing for dollars, euros, sterling and yen.
By Andrew Capon and David Lanchner
Institutional Investor Magazine
To read the complete series of articles about each of the top 2000 deals in Mergers & Acquisitions, Corporate Finance, Public Finance, Real Estate and Derivatives please to go to the Rankings section of this site, scroll down the page to the “Deals of the Year” section, and click on “2000".
European corporate finance, M&A , even sovereigns , shared a telecom line in 2000.
Two European central banks put an exclamation point on corporate finance in 2000. At year-end the Bank of England and the Banque de France warned that investor exposure to telecommunications financing was so huge that it posed a threat to global economic stability. Whether those advisories wind up marking the peak of telecom capital markets activity or simply amount to an acknowledgment of a phenomenal year for some investment bankers, they do underscore the dominance of mobile phone funding in 2000.
Telecom presence was so overwhelming that even sovereigns benefited. The German government was able to raise E50 billion ($45.7 billion), five times its original projection, by auctioning off licenses for so-called third-generation mobile phone bandwidth. The money will be used to reduce the federal debt.
Germany wasn,t alone in finding a receptive market. Telecom borrowing rose from 6 percent of the syndicated loan market in 1999 to 20 percent last year, according to the Bank of England. European telecoms also issued more bonds in 2000 than any other industry sector: $85.4 billion, or 46 percent of a record $186.8 billion in international corporate bond offerings from European companies, according to Capital Data in London. The level of telecom debt issuance was twice as high as in 1999, which was itself a record.
Neither did telecom operators shy away from the equity market. Together with technology companies, they issued 76 percent of last year’s record $90.8 billion of initial stock offerings in Europe and 63 percent of the record $205 billion in new equity issues.
It seems unlikely that the pace will continue. Even before the central banks weighed in, the markets themselves signaled their own form of phone fatigue. Most of 2000’s equity offerings took place in the first few months of the year, before the stock market swoon gained force. By early December telecom stocks had fallen by an average of 57 percent for the year. Equity troubles also slowed the feverish merger pace: Telecom M&A in 2000 was less than half the $346 billion recorded in 1999.
“Deals are harder to get in difficult markets and when stock prices are falling,” says Tom King, global head of M&A at Schroder Salomon Smith Barney, who nonetheless expects a new burst of acquisitions when the markets rebound.
If they don,t, the focus can return to other European financing accomplishments around the globe, many of which were obscured in 2000. Among them: Poland returned to the markets with a hugely successful debt offering; the U.K.'s HSBC Holdings entered France to acquire Crédit Commercial de France, Europe’s biggest cross-border bank purchase; Italy tapped the power of the Internet to sell notes worldwide; and Belgian power developer Tractebel and French oil company TotalFinaElf closed on a more than $1 billion syndicated loan to proceed with the acquisition and expansion of the Taweelah A1 power and water plant in the United Arab Emirates.