Yanks Are Coming To Euro Market


Level 3 Communications and Amazon.com will not be the last well-known American companies to come to market with transactions partially denominated in euros, sources said last week.

As more U.S.-based companies move to expand their businesses across the pond, the high yield market will likely see more of these issues, especially from those vying to take advantage of Europe's lucrative telecom boom.

"What you're seeing is a lot of U.S. carriers [making] expenditures on infrastructure and preparations for meaningful operations in Europe," said Colin Marshall, an analyst with ING Barings.

With the set-up of these operations comes liabilities in local currency, so issuing debt in euros makes sense as a hedging tactic, sources said.

And high yield benchmark Level 3, a Colorado-based fiber-optic network company, is a perfect example.

"In the case of Level 3, those guys are building a network infrastructure," Marshall said. "They are investing in network assets in Europe and deploying those assets in the hopes of starting a business in Europe."

In addition to a $1 billion issuance, the company plans to sell privately about euro 400 million of bonds, divided between senior notes due 2008 and senior notes due 2010, which can be repaid after five years. Salomon Smith Barney will manage the sale, along with Morgan Stanley Dean Witter and Goldman, Sachs & Co.

"Europe is becoming an ultimate source of capital," said a London-based analyst. "A tremendous amount of money is coming into the market."

While telecom is clearly dominant as new players hop abroad following deregulation, sources said the trend is not likely to stop there. As the industrial sector and other components of the high yield market grow, the trend will encompass those companies as well.

"In general, yes, I think we're going to see more of it in the future," said Frank Knowles, head of European high yield credit research at Merrill Lynch & Co. "I think generally it's a good trend both for the issuers and the investors."

As for Amazon.com, the company's euro 600 million convertible bond offer was on tap for late Thursday. The convertible subordinated notes, underwritten by Morgan Stanley Dean Witter, are due 2010.

They are reportedly expected to be received fairly well in Europe, despite scrutiny in the U.S. for its spending spree.