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Swedish Corporate Bond Market Grows As Bank Credit Tightens
Friday, 13 April 2012
Swedish companies are increasingly turning to the bond market for
financing as access to bank credit has tightened since the autumn in
the wake of the euro-zone debt crisis and tough new financial
regulation, Danish bank Danske Bank A/S (DANSKE.KO) said Friday.
Compared with the crisis-struck euro zone, companies in Sweden still
have decent access to bank funding, but it has become harder for
smaller firms and capital intensive businesses such as property groups
to get loans, Danske Bank's head of credit analysis in Sweden, Louis
Landeman, told Dow Jones Newswires.
"We have seen a clear contraction since the autumn," Landeman said, but
added that "during this period there has been an extreme credit
contraction in Europe, and in the light of that, the situation in
Sweden still looks relatively sound."
Danske Bank's "Credit Barometer" index fell to 57 in its latest
twice-yearly study of Swedish credit conditions, conducted in March
this year, compared with 68 in September, indicating a tougher funding
climate, the bank said.
Stricter financial regulation such as the international Basel III
capital requirements, which have been rolled out in the wake of the
recent crisis to make the financial industry less risky, have forced
banks to trim their loan portfolios, it added.
Capital intensive firms are increasingly raising their funds directly
through the financial markets, Danske Bank said, noting that Swedish
property companies issued 4.8 billion kronor ($711 million) of
corporate bonds in the first quarter this year compared with SEK2.3
billion a year earlier.
This development mirrors the trends elsewhere in Europe. European
companies have traditionally relied on bank financing, but during the
first quarter borrowed more from the bond market than they did from
banks, according to data provider Dealogic.
In Sweden, corporate bonds currently make up somewhere around 20% of
the companies' financing, but in the long run that figure is likely to
move towards the levels seen in the U.S. and recently on the European
continent, Landeman said.
Companies such as real-estate group Klovern AB (KLOV.SK) and wind power
firm Arise Windpower AB (AWP.SK) have recently entered the bond market
with new issues, and the number is set to grow as banks' lending will
remain restricted by tough new regulation, he added.
Because of the volatility on stock markets and low yields on government
bonds, the demand for corporate bonds is also on the rise, said
It will take time for Swedish corporate bond volumes to develop as the
investor base needs to grow and institutional investors will have to
build up capacity and analysis resources for the segment, he said, but
added that the corporate bond market is attracting growing attention
News source: Dow Jones News
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