After initially encountering a number of false starts, the European hybrid capital market has become an established and welcome addition to the capital structure for many corporates. While the €6bn of public issuance in 2006 fell slightly short of volumes seen the previous year, many analysts had expected a bumper crop of supply in 2007, consistent with an increase in M&A activity in the second half of last year. Things got off to an encouraging start in January when a hybrid from Austrian b

Franck Robard: It will take time for issuers to become familiar with the new concepts and requirements. They will need to become comfortable with how it works and what are the exact legal consequences for them of having such governance in the documentation. If we go back to the very beginning of this market in December 2005, some European corporates were not comfortable even with the statement of intention of the replacement language required by rating agencies to optimise the benefits of hybrid

Geoff Tarrant: You only have to look at the level of demand incurred by the two largest issues this year, Wienerberger and Rexam, each of which commanded €5bn plus of interest within a very short period of time. These issuers have got investment grade senior ratings and these transactions are attractive due to the spread that is on offer. The Siemens issue last year also illustrated how much demand there is for strong names having seen a total book in the order of €13bn across both of the tranch

IFR: I would like to kick off the discussion by taking a look at corporate hybrid supply so far this year, or to be more accurate, the lack of it. The pick-up in M&A activity towards the end of last year had fuelled expectations that supply would exceed volumes we have seen in recent years. However, this has certainly not been the case with only three public deals this year so far. Why is that? Geoff Tarrant, Deutsche Bank: This is a very good question. Firstly, consensus expectations were a

Franck Robard - SG CIB Franck Robard is Head of Hybrid Capital Structuring team responsible for structuring hybrid capital instruments efficient from a tax, rating, accounting and regulatory aspects for financials institutions (banks and insurance companies and corporates). He has completed several Tier 1 transactions for banks in Europe and majors hybrid capital issues for insurances companies and corporates. Before joining SG CIB in 2000, Franck Robard was Head of Credit Research at Ixis CIB w