UK corporate borrowing hits five-year high

Michael Bow
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UK FIRMS are borrowing more money from investors than at any other time since the financial crisis, a study out yesterday showed, as companies increasingly turn to the bond markets to access credit.

UK corporate debt issuances have soared to $85.2bn (£53.4bn) so far this year, a record high and a 70 per cent increase on the $50.1bn raised by firms at the same point last year, figures published by Dealogic yesterday show.

A-grade corporate debt issues have also soared 67 per cent compared to last year, while issues of overall investment grade corporate bonds, rated BBB or above by credit agencies, have surpassed the previous record in 2009 by 16 per cent – a further sign of the booming corporate debt market.

Firms have increasingly tapped the bond markets to fill the void left by traditional lending as banks deleverage their balance sheets. Bond investors have also been tempted to access corporate bonds due to the higher value for money they offer compared to other fixed income products such as UK gilts.

Yesterday’s figures show the spread on UK corporate debt – the difference between UK corporate debt returns and gilt returns – hit 204 basis points this year. That is the highest level since the historic highs of 2009 when spreads widened to 294 basis points.

The UK accounts for 21 per cent of European corporate investment grade issue volumes in the current year to date, down from its peak in 2008 when it accounted for 30 per cent.

Despite the pullback in bank lending, the sector is still heavily involved in the issue of corporate debt. According to Dealogic figures, Barclays is the leading UK corporate bookrunner for the year so far with a market share of 11.3 per cent. Second is Royal Bank of Scotland with 10.6 per cent market share and third is HSBC with 8.8 per cent.