European high yield issuance sets April record, capped by late-month flurry

Last month closed as the busiest April on record for European high yield, as a logjam of pent-up deals emerged into an increasingly constructive primary market where higher-rated repeat issuers are printing with little-to-no premium to fair value.

There was a steady flow of companies tapping the market on an opportunistic basis to refinance debt, as well as an acceleration in new money through well-flagged LBOs and the first syndicated bonds to support dividend payments since January.

Late flurry A month-end flurry of roughly €4.5 billion of high yield bonds issued across 10 tranches took April’s supply to €14.1 billion, according to LCD. As well as setting a new April record, this tally represents a sharp 445% increase on the primary high yield supply tracked in March — and also marks the largest-ever absolute rise in monthly European high yield volume when holiday months are excluded.

“For more than two years, high yield companies didn’t want to refinance early because the narrative was that spreads and rates are coming down,” said a London-based high yield fund manager. “With the series of market dislocations we have had, issuers have finally got the picture that the old adage still stands — go to market when you can, not when you have to.”

Broad base Refinancing continues to drive supply, but the main story is a broadening in activity to include dividends and M&A, with new issuers paying a minimal premium when compared to the LBO financings that tentatively reopened primary markets in March.

“I’m happy there is a market and deals are getting done, but we have to be more careful about what we underwrite and bring to market,” said a banker who is sceptical about the recent shift in sentiment. “We are telling every client to get ready because you get a fantastic outcome if you hit the right market — but if you miss the window you will pay big time.”

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Featured image by Nikada/Getty Images This article originally appeared on PitchBook News