Private placements are on the rise for companies worldwide, with record issuance volumes expected this year in the private market. In addition, a number of companies have upped their deal sizes on the back of strong investor demand.

Companies raised $27.4 billion in the first half of this year, according to Thomson Reuters data, which is just below the $28.5 billion in private placement volumes seen over the full year last year.

According to a report in the FT, bankers expect volumes to surpass $41 billion in privately-placed transactions this year, making it the strongest year for private deals since 2003.

Often used by mid-sized firms, the private placement market offers much-needed diversification for companies away from beleaguered bank lending.

It is also increasingly appealing to multinationals, with Dutch brewer Heineken and UK MNC Whitbread having launched deals already this year and SAP on track to do a private placement in September.

In the US, American Transmission (ATC) last week priced a $300 million private bond through JP Morgan that was upped from a planned $200 million.

The deal included three tranches, according to industry news provider Private Placement Letter: a $75 million 15-year bullet that came in at 155 basis points above Treasuries; a $75 million 15-year bullet at 165 bps over; and a $150 million 30-year bullet at 145 bps over.

Schreiber Foods also priced a US private deal last week–bringing in $200 million in two tranches: a seven-year, $100 million piece and a five-year, $100 million piece–each of which priced at 150 bps over their respective Treasury benchmarks.

The Schreiber Foods deal gives a clear indication of investor appetite. It was upped from $125 million and priced in by 15-20 bps over initial guidance on strong demand. 

According to the FT report, the supply-demand imbalance is coming from real money investors–such as pension funds, insurance companies and retail mutual funds, that are not borrowing money to invest–keen to diversify their portfolios. There is a big push from some large institutions that are now underweight in this space.

Although traditionally a strong market in the US, European companies are increasingly looking to private placements to replace much-reduced bank lending.