A structural shift in corporate financing in the Nordic region is accelerating, as companies turn away from traditional bank lending to access domestic and international capital markets funding.
The development could lead to a sharp rise in domestic bond issuance in particular, as small-, medium- and large-cap Nordic companies seek to diversify funding and lock in competitive pricing levels and deep local market liquidity.
Nordic postal company PostNord AB provided the most recent example of this in September when it sold SKr2 billion ($303.25 million) of five-year bonds – one of the largest unrated corporate bond issues in the Swedish market. Swedish telecoms company Tele2 AB’s SKr2.3 billion bond sale in May is the largest to date.
Higher capital requirements for banks under Basel III regulations are one of the fundamental drivers of this structural shift as bank lending to companies becomes restricted and loan costs rise, according to a report from rating agency Standard & Poor’s in September.
"These [regulations] are likely to increase banks’ incentives to lend for shorter terms and reduce the amount of bank lending available, thereby pushing up the cost of bank borrowing," notes Andreas Kindahl, primary credit analyst at S&P in Stockholm.