Flexibility in funding: Developing financing strategies that reflect evolving market conditions

Hayley Basterfield, Global Head of Debt Capital Markets, Lloyds Corporate & Institutional

Kirsty Garrett, Director, Corporate Debt Capital Markets, Lloyds Corporate & Institutional

Flexibility in funding: Developing financing strategies that reflect evolving market conditions

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Following the uncertainty experienced in the first half of 2025 driven by the imposition of trade tariffs, credit markets proved increasingly robust through the remainder of the year and into early 2026. Many issuers capitalised on historically tight credit spreads, expectations of rate cuts and relatively stable yields, to execute significantly over-subscribed capital markets transactions thanks to strong investor liquidity. Recent global developments have disrupted this backdrop and against this environment, corporates targeting debt issuance in 2026 are now reassessing the implications for their financing strategies.

Hayley Basterfield,

Global Head of Debt Capital Markets, Lloyds Corporate & Institutional

Kirsty Garrett,

Director, Corporate Debt Capital Markets, Lloyds Corporate & Institutional

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Maximising optionality

UK corporates generally continue to operate with strong liquidity positions, providing optionality when evaluating forthcoming refinancing or new funding requirements. A number of issuers also pre-funded upcoming maturities during 2025, often alongside liability management exercises that aim to reduce the cost of carry by utilising some of the new proceeds raised to buy-back a portion of outstanding future bonds. If you have excess liquidity the rise in volatility can present an excellent opportunity to deploy that.

Looking ahead, maintaining agility is essential. A ‘little-and-often’ approach to funding can help mitigate the risk of being forced to issue during periods of market disruption. To support this, a flexible treasury policy – underpinned by appropriately delegated approvals – enables issuers to act when market windows emerge. Issuers can ensure execution readiness by establishing, and maintaining, an up-to-date Euro Medium Term Note (EMTN) programme. Such a document allows a company to issue bonds on an ongoing basis across a range of currencies, maturities and structures, reducing market access lead times.

Practically, this should be complemented by a comprehensive investor presentation readily available on the issuer’s website, and utilised during deal and non-deal engagement with investors. For corporates with outstanding bonds, investors value regular opportunities for direct dialogue, as this enhances their ongoing credit assessment and provides a forum to discuss future funding plans. Such engagement can also stimulate reverse enquiries from investors for taps, Medium-Term Notes (MTNs) and retained bond sales, or anchor orders in a new issue – supplementing an issuer’s broader funding strategy. For more frequent issuers, a strong investor relations framework also supports effective intraday execution, minimising exposure to market volatility.

During periods of market disruption, corporates can also look to bank financing to bridge temporary dislocations. Options may include bridging facilities, term loans, increased availability of Revolving Credit Facilities (RCF), commercial paper and bond underwrites. Engaging in strategic discussions with key banking partners early increases the likelihood of achieving efficient long-term funding objectives.

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Has the current interest rate environment impacted your plans to access the capital markets?

No – I am still planning to issue within the same timeframe
Yes – I have now pushed back my issuance from H1 to H2 2026
Yes – I have now pushed back my issuance from H2 2026 to H1 2027
Yes – I am now interested in alternative financing options

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Looking beyond sterling

The sterling bond market has recently demonstrated significant depth, with Alphabet’s five-tranche £5.5 billion transaction in February attracting nearly £30 billion in orders – one of the largest sterling corporate issuances in history. While this is encouraging for corporates with sterling funding requirements, maintaining an open approach to currency, maturity, execution strategy, and debt instrument can unlock the best relative value at a given time.

Given the broader investor universe in Europe and the relative interest rate differential between the Eurozone and the UK, euro funding has become an increasingly attractive option for companies and now features more prominently across UK corporate balance sheets. Issuers with natural euro assets and/or cash flows may choose to retain euro liabilities, while others can convert principal and coupon payments back to sterling via cross-currency swaps. The US dollar market also offers similar flexibility and tends to remain more resilient than sterling or euros during volatile periods, due to its depth and global investor base.

Further, the US Private Placement (USPP) market is a valuable tool for treasurers, offering a private execution route, no benchmark-size constraints, multi-tranche and multi-currency options, and the potential to reduce cost of carry through delayed settlements. Lloyds has recently supported several public bond issuers with smaller, discreet USPP transactions to help bolster liquidity positions.

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Market evolution

In January 2026, the Financial Conduct Authority (FCA) introduced a series of regulatory changes designed to improve retail investor access and streamline debt issuance, ultimately reducing cost and complexity for issuers.

The most notable development is the introduction of Plain Vanilla Listed Bonds (PVLBs). These allow listed companies – or wholly-owned subsidiaries with a full guarantee – to issue unsubordinated, unsecured, low-denomination bonds accessible to retail investors.

Lloyds recently led the first consent transaction under this new regime, enabling the conversion of specific outstanding sterling bonds into PVLBs through a reduction in minimum denominations. This change allows retail platforms to acquire and distribute the bonds in the secondary market ahead of any future primary sterling issuance by the company. As a result, the client’s secondary curve is expected to benefit from increased liquidity, supported by a broader investor base. We expect other issuers to follow, with the next evolution likely to be the issuance of PVLBs in primary format.

Additional FCA reforms include the simplification of issuers without EMTN programmes to tap existing bonds without a requirement to publish a new prospectus – provided the tap size is below 75% of the outstanding bond amount. In addition, issuers will no longer need to update prospectuses with future financial information; instead, this can be incorporated by reference, reducing administrative burden, lowering costs and enabling more timely market access following financial reporting.

In 2026, the Lloyds Debt Capital Markets (DCM) team has supported UK corporates to raise GBP, USD, EUR and CHF denominated funding, across public bond and US Private Placement markets, tailored to meet their specific needs. Working with colleagues across risk management, the team has supported clients in navigating uncertain market conditions through a range of considered funding approaches.

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