When equity market confidence collapsed in April, it looked like it might be a knockout blow for global convertible bond issuance, but the market seems to have been given a new lease of life in May.

While there were fears over prospects for global issuance after many stocks hit year-to-date lows in early April, when US President Donald Trump’s aggressive tariff scheme rattled global markets, a subsequent recovery is paving the way for a rebound in issuance of equity-linked notes.

“We expect to see more convertible issuance before summer, and not only in Asia but also in the US where the Q1 earnings are now done and companies are out of blackout,” said Ivan Nikolov, head of convertible bonds at Fisch Asset Management. “If the current trend persists, 2025 should be another USD 100bn+ year for the global CB primary market.”

This month, as of 18 May, corporates raised USD 7.9bn by offering convertible or exchangeable bonds, more than double the USD 3bn recorded in the entire April. In the full month of May 2024, USD 18.38bn worth of such papers were printed worldwide, Dealogic data shows. Issuance were rather concentrated. In the week ended 16 May alone, issuers sold USD 6.78bn worth of notes, making it the best week in about a year.

The primary issuance gains were across the all three main global regions. There were no shortage of billion-dollar offerings.

In the US, Akamai Technologies sold a USD 1.5bn 8-year note, while Uber Technologies issued a USD 1.15bn exchangeable into Aurora Innovation.

In Asia, LG Chem revisited the market, printing a USD 1bn exchangeable bond into LG Energy Solution for refinancing, while Sinopec Group of China finally printed its long-awaited USD 994m from an exchangeable paper into Sinopec Corp.

Europe’s Vonovia raised USD 1.448bn from a two-tranche note, which was the largest offering since Spotify’s USD 1.5bn sale in February 2021.

Syed Raj Imteaz, Head of Convertible and Equity Derivatives Advisory at ICR Capital, believes many potential issuers were initially caught in a state of shock in the wake of Trump’s tariff measures, and shortly thereafter, their plan was to “stress test” their businesses and balance sheets.

“My thought process is that once this internal stress-testing is completed, which can take takes several weeks, a number of our clients would want to raise capital,” said Raj, who focuses on the US market. “And yes, I think we are in the capital raising phase now. ”

Secondary pricing has been supportive.

Globally and regionally, convertible market returns returns year to date range between 4% and 11% in USD, according to Nikolov. The European market, a distant laggard among the three geographies in 2024, is roaring back, with index returns above 11%.

A big part of the gains in European CBs, though, is driven by select names such as Rheinmetall AG, which issued two USD 542.45m tranches of convertible bonds in 2023. The German defense and automotive group’s share price trades at 25x its valuation five years ago.

US papers, meanwhile, have returned around 4%, behind both Europe and Asia, though its performance as such was expected given the selloffs in stocks, especially in April.

Asia (ex-Japan) has been in the middle, delivering around 7% returns, according to Nikolov.

Following two billion-dollar deals last week, we expect a couple of issuers to capture the window while it lasts.

Among them, ZTO is widely expected to refinance its USD 1bn 1.5% coupon CB puttable on 2 Sep 2025. The Chinese logistics services provider is expected to issue a rollover deal after 1Q25 results announcement on 20 May.

As of full year ended 31 December 2024, ZTO had USD 1.8bn in cash & cash equivalents on hand, against short term obligation of USD 2.3bn (this includes provision for the CB redemption). Short term liquidity is tight, and they may have to fundraise or refinance to satisfy the CB redemption, based on this news service’s analytics.

ZTO is operating at a current ratio of 1.1x current assets per current liabilities, and net leverage stands at 0.25x net debt to EBITDA.

Global top 10 equity-linked bond offerings YTD 2025

Data: Dealogic

In the US, interesting opportunities remain to invest in growth stories, especially in healthcare and technology outside of mega-cap names. Meanwhile, over in the Europe, the convertible market new issuance remains traditionally oriented more towards sectors like industrials and real estate, playing to more defensively minded investors.

“As investors, what we really seek is exciting growth stories, exciting companies, with stable credit profiles,” said Nikolov. “We are always happy to see more issuance as it increases our opportunity set…Asian issuance is definitely positive, because stocks there generally benefit from growth at more reasonable valuations.”

Like the true prizefighter it is, it didn’t take the global CB market long to get off the mat.