Capital Structure: U.S. Versus Europe

A major difference in the capital structure of U.S and European companies' balance sheets is the source of debt. European companies have traditionally relied heavily on bank debt rather than publicly traded debt. The total publicly traded debt of European companies is just 7 percent of GDP, compared to 35 percent in the U.S. With the recent banking turmoil in Europe, European banks have been deleveraging balance sheets. As a result, European companies have been issuing bonds in large amounts. For example, AB InBev issued $7.5 billion worth of bonds and Unilever issued $1 billion in bonds. Because of new banking regulations and economic problems, European banks are expected to shed $2 trillion over the next several years, which will likely increase corporate bond issues in Europe even further.