With high-yield bond issuance of $13.8 billion in May, and cumulative issuance reaching $70 billion, 2014 looks well placed to set another issuance record, says Moody’s in the June edition of its “High Yield Interest – European Edition” publication.
Positive sentiment for the remainder of 2014 was also expressed at Moody’s high-yield conference on May 21. Moody’s also expects to see further European private equity IPO exits, particularly given recent policy actions and statements by the European Central Bank, and despite recent setbacks for certain UK IPOs. “IPOs remain the favoured exit route for many private equity-owned companies, although they retain parallel processes for secondary (or tertiary) sales to other sponsors in case the equity markets weaken,” says Chetan Modi, managing director for Moody’s European leveraged finance. “Changes in credit metrics and financial policy are key rating considerations.”
Although covenant protection in Europe remains stronger than in the US, protection in both markets is deteriorating at a similar rate. In particular, debt incurrence and restricted payment capacity increased in 2013. Moody’s also see more subtle changes that make it more difficult for investors to determine the actual capacity.
