Historically low interest rates and more costly loans from banks are set to fuel a diversification of issuance of, and more demand for, corporate bonds in the Nordic region, research by Standard & Poor's suggests.
Costs of funding to drive issuance
S&P still believes that more Nordic corporate bonds will be issued in future.
In part, this will be because companies face more difficult economic conditions, so they may need to raise more money to finance their activities.
But more issuance is also expected because regulation is likely to raise the cost of loans from banks, which will become more selective in where they lend. More difficult bank lending conditions are likely to be felt most sharply by SME’s.
For investors interested in buying Nordic corporate bonds, the implication is that refinancing and liquidity risk will become more important factors to consider, S&P added.
“We anticipate that the largest growth in the capital markets will come from mid-size companies that are fully or partly squeezed out of the bank lending markets as banks become increasingly selective.
“The net result, in our view, is that corporate treasurers will consider the capital markets as an attractive source of liquidity for term financing and offer companies access to the capital markets to reduce their dependency on the banking community.
“Nevertheless, we believe banks will remain the main source of debt financing for Nordic companies. This is because the Nordic banks remain relatively healthy and have good access to funding.”
Thomas Hovard, chief analyst at Danske Markets, said the prognosis of more SME companies seeking funding from bond markets was something he agreed with in general.
Institutional investors are increasingly looking to investments in corporate bonds, he added, in light of the low ongoing interest rates and the levels of volatility seen in equity markets. This is creating demand in areas such as high yield, he said.
In Denmark, companies such as AP Møller-Mærsk, Dong, Carlsberg, Vestas, ISS and TDC have, historically, used capital markets as a supplement to bank loans, he added.
“We expect, in line with S&P, that more Nordic companies will use the bond market in future, including more Danish issuers.”
|Nordic corporate and infrastructure bonds rated by S&P (as of 12 Sept)|
|AB Volvo BBB/Stable/A-2 BBB/Stable/A-2/K-2 Sweden|
|Alfa Laval AB BBB+/Positive/– BBB+/Positive/– Sweden|
|Assa Abloy AB A-/Stable/A-2 A-/Stable/A-2/K-1 Sweden|
|Atlas Copco AB A/Stable/A-1 A/Stable/A-1/K-1 Sweden|
|Autoliv Inc. BBB+/Stable/A-2 BBB+/Stable/A-2/K-1 Sweden|
|Bakkavor Group ehf B-/Stable/– B-/Stable/– Iceland|
|Copenhagen Airports A/S BBB-/Negative/– BBB-/Negative/– Denmark|
|Dometic Group AB B/Negative/– B/Negative/– Sweden|
|DONG Energy A/S A-/Watch Neg/A-2 A-/Watch Neg/A-2 Denmark|
|Dynea International Oy B/Stable/– B/Stable/– Finland|
|E.ON Sverige AB A-/Stable/A-2 A-/Stable/A-2/K-1 Sweden|
|Electrolux AB BBB+/Stable/A-2 BBB+/Stable/A-2/K-1 Sweden|
|Elisa Corp. BBB/Stable/A-2 BBB/Stable/A-2 Finland|
|Energinet.dk SOV AA/Stable/A-1+ AA/Stable/A-1+/K-1 Denmark|
|Ericsson (Telefonaktiebolaget L.M.) BBB+/Stable/A-2 BBB+/Stable/A-2/K-1 Sweden|
|Fingrid Oyj AA-/Negative/A-1+ AA-/Negative/A-1+/K-1 Finland|
|Fortum Oyj A/Negative/A-1 A/Negative/A-1/K-1 Finland|
|Holmen AB BBB/Stable/A-2 BBB/Stable/A-2/K-2 Sweden|
|Industrivarden AB A-/Stable/A-2 A-/Stable/A-2/K-1 Sweden|
|Investor AB AA-/Stable/A-1+ AA-/Stable/A-1+/K-1 Sweden|
|ISS A/S BB-/Positive/– BB-/Positive/– Denmark|
|L E Lundbergforetagen AB A+/Stable/A-1 A+/Stable/A-1/K-1 Sweden|
|Landsvirkjun BB/Stable/B BB/Stable/B Iceland|
|Lunds Energikoncernen AB BBB+/Negative/A-2 BBB+/Negative/A-2/K-1 Sweden|
|Metsa Board Corp. B-/Stable/B B-/Stable/B Finland|
|Metso Corp. BBB/Positive/A-2 BBB/Positive/A-2 Finland|
|Nobina AB SD/NM/– SD/NM/– Sweden|
|Nokia Corp. BB-/Negative/B BB-/Negative/B Finland|
|NorCell Sweden Holding 2 AB(publ) B/Stable/– B/Stable/– Sweden|
|Norges Statsbaner AS AA-/Stable/A-1+ AA-/Stable/A-1+ Norway|
|Norsk Hydro ASA BBB/Stable/A-2 BBB/Stable/A-2 Norway|
|Norske Skogindustrier ASA B-/Stable/B B-/Stable/B Norway|
|Novo Nordisk A/S A+/Stable/A-1 A+/Stable/A-1 Denmark|
|Octapharma Nordic AB BB+/Stable/– BB+/Stable/– Sweden|
|Petroleum Geo-Services ASA BB/Stable/– BB/Stable/– Norway|
|Sandvik AB BBB+/Stable/A-2 BBB+/Stable/A-2/K-1 Sweden|
|SAS AB B-/Negative/– B-/Negative/– Sweden|
|Scania (publ.) AB A-/Positive/A-2 A-/Positive/A-2; zaAA+/zaA-1 Sweden|
|Securitas AB BBB/Stable/A-2 BBB/Stable/A-2 Sweden|
|SKF AB A-/Stable/– A-/Stable/– Sweden|
|SSAB AB BB+/Negative/B BB+/Negative/B Sweden|
|Statkraft AS A-/Stable/A-2 A-/Stable/A-2 Norway|
|Statnett SF A+/Stable/A-1 A+/Stable/A-1 Norway|
|Nordic Issuers Rating List* (cont.)|
|Statoil ASA AA-/Stable/A-1+ AA-/Stable/A-1+ Norway|
|Stena AB BB/Stable/– BB/Stable/– Sweden|
|Stora Enso Oyj BB/Stable/B BB/Stable/B/K-4 Finland|
|Svenska Cellulosa Aktiebolaget SCA BBB+/Stable/A-2 BBB+/Stable/A-2/K-1 Sweden|
|Swedish Match AB BBB/Stable/A-2 BBB/Stable/A-2 Sweden|
|TDC A/S BBB/Positive/A-2 BBB/Positive/A-2 Denmark|
|Tekniska Verken i Linkoping AB A/Stable/A-1 A/Stable/A-1/K-1 Sweden|
|Telenor ASA A-/Stable/A-2 A-/Stable/A-2 Norway|
|TeliaSonera AB A-/Stable/A-2 A-/Stable/A-2/K-1 Sweden|
|Teollisuuden Voima Oyj BBB/Stable/A-2 BBB/Stable/A-2 Finland|
|UPM-Kymmene Corp. BB/Stable/B BB/Stable/B Finland|
|Vattenfall AB A-/Stable/A-2 A-/Stable/A-2/K-1 Sweden|
|Verisure Holding AB B/Stable/– B/Stable/– Sweden|
|Welltec A/S BB-/Stable/– BB-/Stable/– Denmark|
|Yara International ASA BBB/Stable/A-2 BBB/Stable/A-2 Norway|