The last 18 months have seen non-financial companies embracing Europe's market for hybrid securities. Already a popular option with banks and insurers, a total of 15 non-financial companies also used the market to raise the equivalent of around $18 billion. The pace of issuance was only briefly slowed by market turmoil in May and June, and issuers as diverse as sports-car maker Porsche and family owned mail-order retailer Otto rubbed shoulders with the likes of Italian lottery operator Lottomatica and French construction giant Vinci. General Electric Co. even joined the party in September, issuing an innovative security with one tranche denominated in euros and one in British sterling.

By contrast, only eight non-financials have tapped the U.S. hybrid market for a total of roughly $4 billion over the same period, and all but two of them have been from the utility sector. This year should be a different story, say bankers, with issuance expected to increase and a wider range of companies looking at this new financing option, which is part bond, part equity.

One New York-based banker says that his team is working on two deals that are set to come to market in the first quarter of 2007, one of which is for a company in the consumer products space. At JPMorgan Chase, Sarah Chessin, the New York-based co-head of hybrid issuance, also expects hybrids to establish themselves as a viable option for more companies in the coming year: "There's a lot of dialogue going on throughout the corporate spectrum. Companies are beginning to get their arms around this product. They're getting more comfortable and are just looking out for the right application."

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