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Hybrid bonds grow in appeal in Europe

Corporate borrowers are benefiting as QE measures suppress yields across the region, encouraging investors to relax their standards.

SMOOTH TAKEOFF: Air France-KLM Group in March sold 400m euros of hybrid bonds that count as equity and have coupons that may depend on the company's ability to pay dividends, even though the airline hasn't paid shareholder coupons since 2008.
FUNDING ACQUISITIONS: Repsol SA, Spain's largest energy company, sold 2b euros of the notes and may issue as much as 5b euros for its purchase of Canadian firm Talisman Energy Inc.

THE appeal of risky debt is deepening in Europe, even as credit quality slides and compensation shrinks.

The balance has shifted in favour of companies, which are on pace to sell a record amount of hybrid bonds this year. Non-financial borrowers have already issued more than 19 billion