In 2015, U.S. companies are forecast to cross the Atlantic toraise funds in euros at the fastest pace in at least eight years,as borrowing costs in Europe fall below dollar rates by the most ina decade.

Apple Inc., Verizon Communications Inc., and Albemarle Corp. led68 billion euros (US$83 billion) of bond issuance by Americanborrowers this year, the busiest since 2007 and 45 percent higherthan 2013, according to data compiled by Bloomberg. The number willbe surpassed next year as depressed funding costs endure, accordingto Barnaby Martin, a credit strategist at Bank of America MerrillLynch, and Jens Vanbrabant, the lead money manager at London-basedECM Asset Management Ltd.

While Federal Reserve Chair Janet Yellen has set the stagefor higher U.S. borrowing costs next year, European interest ratesare predicted by economists to remain at record lows. As inflationin the region is poised to turn negative, momentum is building forthe European Central Bank (ECB) to start a quantitative easingprogram of government bond purchases to boost growth.

“We would expect the yield gap to widen in the first half of theyear on expectations that the ECB will continue to pump cash intothe system through the purchase of bonds and that the Fed willraise interest rates,” said Jonathan Pitkanen, the London-basedhead of investment-grade credit research at Threadneedle AssetManagement Ltd., which oversees 92.6 billion pounds ($144billion).

The average yield investors demand to hold investment-gradecorporate bonds in euros is 2.11 percentage points less thancomparable dollar-denominated notes, the biggest difference sincedata started to be compiled in December 2004 and wider than the1.25 percentage-point gap at the start of the year, Bank of AmericaMerrill Lynch data show.

Acquisition Financing

Albemarle is capitalizing on the difference in cost. The BatonRouge, Louisiana-based chemical maker sold euro bonds for the firsttime on Dec. 1 and plans to return for more. For three days in therun up to the sale, Chief Financial Officer Scott Tozier andTreasurer Lorin Crenshaw traveled from Frankfurt to London, Paris,and Amsterdam, meeting investors to drum up interest in their 700million-euro offering.

“There have been a number of companies that have stepped uptheir European borrowing this year, and that opened the doors forus,” Tozier said. “I fully expect we will go in again.”

The company's notes had a coupon of 1.875 percent, almost halfof what they would have had to pay in the U.S., Tozier said. Itused proceeds to fund its purchase of lithium producer RockwoodHoldings Inc. and to refinance debt.

In November, Belden Inc., a St. Louis-based maker of networkingequipment, sold 200 million euros of 5.5 percent bonds maturing2023, its first offering in the currency this year. “We saw it wasa good time for us to be in the market,” said Matt Tractenberg, thecompany's vice president of investor relations. “It's a naturalhedge for us in Europe for our European profits.”

Albemarle and Belden followed Cupertino, California-based Apple,which sold 1.4 billion euros of eight-year notes and an equalamount of 12-year bonds on Nov. 4. Verizon, the largest U.S.wireless carrier, sold 3 billion euros of notes maturing inFebruary 2022 and 2026 as part of a three-part offering on Feb.5.

Apple's 1.4 billion euros of 1.625 percent securities, issued at99.5 euro cents traded at 102 cents on the euro today. NewYork-based Verizon's 1.75 billion euros of 2.375 percent notes wereat 109 cents, after being issued at 99.5 cents.

“Once you have debut issuers doing something, you tend to findit creates a rush of other companies looking to do the same,” saidBank of America Merrill Lynch's Martin.

WP Carey Inc., a New York-based real estate investment trust,this month completed a road show in Europe for euro bonds, itsfirst in the currency, according to people familiar with the matterwho asked not to be identified because they aren't allowed to speakon the subject.

The average yield on investment-grade notes in euros has fallento a record low of 1.12 percent after starting the year at 2.08percent, Bank of America data show. The extra yield investorsdemand to hold the debt instead of government bonds rose to 0.97percentage point, after reaching a seven-year low of 0.91percentage points on Nov. 11.

U.S. company bonds yield 3.23 percent, while the premium overTreasuries is 1.43 percentage points.

2015 Sales

UBS Group AG forecasts there will be 200 billion euros of bondissuance by investment grade, non-financial companies in 2015,compared with 191.5 billion euros issued for the year to date in2014, it said in a Nov. 13 report.

Global companies will continue to sell euro bonds provided thepricing advantage remains, said Frazer Ross, a managing director ofcorporate debt syndicate at Deutsche Bank AG.

“We have a volatile market right now, with the issue of Greececoming back into the equation,” Ross said. “If the euro basis swapworsens and the comparative pricing between the two marketsworsens, will big American companies do euros? The answer is yes,but in much smaller volume.”

Greece faces snap elections early in the New Year after PrimeMinister Antonis Samaras failed in his third and final attempt topersuade parliament to back his candidate for head of state.

The European Central Bank will start large-scale buying ofgovernment bonds next year, more than 90 percent of respondents inBloomberg's monthly survey predicted. The U.S. may raise interestrates for the first time since 2006 in the third quarter, accordingto the median estimate of economists surveyed by BloombergNews.

“Bankers see this opportunity and advise their clients to takeadvantage of it, so the trend should continue into next year,” ECMAsset Management's Vanbrabant said. “Money goes where there'sopportunity.”

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