Conversion premium

11 January 2013 By Neil Unmack Follow @unmack1

From steel group ArcelorMittal to engineer Abengoa, European companies have drawn massive demand for convertible bonds. No matter that last year’s stellar returns won’t be repeated – yield hunger plus stock-market optimism mean the mini-boom won’t end soon.

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ArcelorMittal issued $2.25 billion in a mandatory convertible bond on Jan. 10, part of a $4 billion capital raising comprising equity and convertible bonds. The steelmaker raised $500 million more than planned through the deal.
Spanish engineering group Abengoa raised 400 million euros through a sale of convertible bonds in Jan. 9, 150 million euros more than initially intended. Total orders for the bond totalled 1.2 billion euros, according to a person familiar with the deal.
Sales of convertible bonds in Europe last year totalled 17.7 billion euros, up from 7.5 billion euros in 2011, according to Barclays data. European convertibles returned 16.3 percent in Europe, according to Barclays indices.

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