Moody's: Low rates and improving economy to keep French companies' debt issuance steady in 2018

French companies' bond issuance will remain steady during 2018, supported by low interest rates, accommodative monetary policy and the country's improving economic outlook, Moody's Investors Service said in a report today.

The report, "French non-financial corporates - Stable credit quality, solid markets point to clear skies for debt issuance", is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. This report does not constitute a rating action.

"France's improving macroeconomic prospects, rising business confidence and better profit margins will support corporate investments and debt issuance during 2018," said Guillaume Leglise, a Moody's analyst and the report's author. "Low interest rates and accommodative monetary policies will also continue to support corporates debt issuance."

Moody's expects between EUR65 billion and EUR70 billion worth of bond issuance by French non-financial companies this year and between EUR70 billion and EUR75 billion in 2018.

With refinancing needs appearing to be modest for 2018-19, notably for large and repeat issuers, Moody's believes issuance volume will be more driven by investments and potential M&A activity.

French issuers will continue to have good access to capital markets as their credit quality is broadly stable, with an average rating of Ba1 as of October 2017, unchanged from the last two years.

The rating agency anticipates that large investment grade (IG) companies will continue to drive the market. More than 80% of bond issuance volumes this year were led by IG issuers, according to Dealogic data. Large and repeat issuers clearly benefitted from low interest rates and took the opportunity to issue longer-dated paper.

French high yield (HY) issuances grew in 2017 mainly supported by record leveraged loan issuances. First-time and single-B rated issuers are back and the issuance momentum is expected to continue on the back of strong investor demand and higher risk appetite for lower rated issuers.

Moody's does not anticipate major liquidity risks for French corporates next year. Overall, they have solid balance sheets and healthy liquidity which is sufficient to meet cash requirements over a 12-month period.