Buy now while bonds last

14 March 2006 By Edward Hadas

Companies and LBO firms are falling over themselves to borrow more for ever bolder deals. Even Vodafone is not considered immune. Why now? Debt is cheap and readily available, but unlikely to stay that way. So borrowers are snapping up debt while stocks last.

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In the last two weeks, the following companies have received, or been rumoured to be about to receive, highly leveraged takeover bids: Suez, Portugal Telecom, VNU, London Stock Exchange, Schering, BOC, Marks and Spencer, BAA and Knight Ridder.

31% of all rated European companies have subinvestment grade, or junk, ratings, according to Moody's Investors Services. That is up from 9% a decade ago.

Since 2000, the portion of European mergers and acquisitions financed by debt and cash has risen from 25% to almost 80%, according to Lehman Brothers. That is the highest nonportion since 1991.

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