A number of European companies are opting to sell loans and high-yield bonds in the United States, and quite successfully, even though they do not necessarily do business here.

With the European markets both smaller and harder hit by the region's sovereign crisis, underwriters are taking advantage of the broader U.S. market's liquidity, as well as a favorable dollar-to-euro swap, participants say.

"High-tier frequent issuers out of Europe that have access to both the U.S. dollar and the euro markets now will probably opt for issuing in dollars and swapping to euros, all things else being equal," said Tim Hall, global head of debt capital markets origination at Credit Agricole CIB.

"The reason is that the basis swap favors issuing in dollars and swapping to euros over straight euro issuance," Hall said. "So even if an issuer does not have a natural need for dollars, going to the U.S. market can still be less expensive."

Most of the sub-investment-grade deals with U.S. dollar tranches have been on the bond side, but a couple of companies have also hit the leveraged loan market, with Taminco Global Chemical, a market favorite, straddling the two.

The Belgian chemical producer earlier this month priced $400 million in 9.75% second-lien notes via the bookrunners Credit Suisse, UBS, Citigroup, Nomura, Deutsche Bank and Goldman Sachs.

The accompanying $505 million term loan was split into tranches totaling $350 million and €120 million. Proceeds from the financings will be used to support Apollo Management's buyout of Taminco from CVC Capital Partners.

With operations on both sides of the Atlantic and in Asia, and revenue in dollars, Taminco's choice to market debt to U.S. investors seems a no-brainer .

Other, less obvious European issuers have also popped over with dollar-denominated tranches.

Polkomtel, Poland's second-largest mobile phone company, this month raised the equivalent of $1.2 billion in the country's biggest sale ever of corporate bonds to help fund its acquisition by the billionaire Zygmunt Solorz-Zak. Polkomtel sold €542.5 million ($700 million) of eight-year bonds at 12.5%, and a $500 million eight-year, dollar tranche at 12%.

"In the autumn, the [European] high-yield market was not working well, and the U.S. market was in slightly better shape, although it was stressed by the environment," said Hall, whose company participated in the deal.

"Therefore," Hall continued, "the leads — Deutsche Bank — "weren't sure Europe would have the capacity to absorb the full amount of the issue, and the natural reaction was to opt for a dual-tranche issue to alleviate the pressure on size."

On the loan side, Kabel Deutschland, Germany's largest cable television operator, increased its first U.S. dollar leveraged loan this month by 50%, to $750 million, because of strong demand.

"U.S. investors are very comfortable with cable TV companies including European ones," said Eric Capp, London-based head of high-yield bond and loan capital markets at RBS, which participated in the deal.

The seven-year loan was priced at Libor plus 325 bps, with original issue discount of 98.5 cents on the dollar and a 1% Libor floor. Goldman Sachs, BNP Paribas, Deutsche Bank, JPMorgan Chase and Morgan Stanley were also on the deal.

Though the U.S. market certainly appears open to a good number of European companies, this may not continue indefinitely, according to some participants. With more U.S.-based deals coming, investors may start to differentiate between those companies with a true U.S. component and those looking for opportunistic pricing.

"We think U.S. investors will be slightly guarded about continuing to take on too much pure European risk," said Martin Horne, managing director at Babson Capital in London. "In the same way that a European market wouldn't take on too much pure U.S. exposure."

Leveraged debt financing in Europe has become difficult as the euro bloc's debt crisis has disrupted the region's bank lending channels. And prolonged weakness in the European high-yield market has made issuance in euros expensive and prone to execution risks.

"It is gradually coming back," Horne said.

"But no bank underwriter wants to be caught out with their first deal of 2012 after the period of volatility we've experienced. It's natural for confidence to grow once they've seen two or three deals. If the first one fails, the next time you go before your investment committee you're going to be against it in terms of convincing them that you can sell these things away."

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