There were other hawkish messages from around the world. The Swiss National Bank delivered a 25 bps hike as expected, but signalled that more hikes were on the horizon. Norges Bank also delivered a surprise 50 bps hike (vs. 25 bps expected from the market).

But the high yield market is still chugging along. 

Moody’s recently published its monthly report on default rates which states that global high-yield default rates increased by 0.2% in May to 3.4% (still below its historical average of 4.1%). The credit rating agency sees the year-end default rate at 4.6%, peaking at 5% in April 2024.

A sellsider from a leading levfin bank said: “The market is pricing quite efficiently — especially compared to a couple of months ago”.

High Yield Primary

Discount retailer Pepco upsized its deal this week from €300m to €375m for its 5NC2s — settling at 7.25% from high 7% IPTs. On the break, Pepco rose to 100.1/100.75 from a price of 100.

The sellsider said: “The deal went quite well in the market. It was also structured on a conservative basis so that makes sense”.

“It’s their inaugural bond issue and leverage looks pretty low — people like it. Pepco also looks cheap vs other BBs in Europe,” said the high yield portfolio manager.

The high yield manager also praised Pepco’s competitive position in the market: “You either want to be discount or aspirational (luxury/high-end)”.

One potential problem was the company’s link to Steinhoff, but this quickly evaporated once investors heard from management. Chris Haffenden explains the background of Pepco and Steinhoff in greater detail in the Friday Workout.

The high yield portfolio manager said: “The NewCo 3 structure sits between Pepco and Steinhoff. Steinhoff doesn’t have controlling ownership. It was my first question on a recent investor call and I was happy with how management went through the structure”.

“Management did a good job on highlights; the Steinhoff situation was well-explained”, said the sellsider. 

Online gaming and sports betting software supplier Playtech also came to market with a €300m 5NC2 SSN — landing at 5.875% and a price of 100. On the break, Playtech traded slightly down to 99/99.5. 

The sellsider said: “Ultimately it was good execution. It’s a well-known name recycling existing notes (net proceeds of the issue were used by Playtech to redeem all of the outstanding €200m 3.75% 2023s)”.

“The deal was squeezed tighter, driven by demand from existing and new investors. Pricing started at low-mid 6%, to 6-6.25%, then revised to 5.875-6% — ultimately settling at 5.875%”, said the sellsider.

As first reported by 9fin a few weeks ago, Burford Capital finally came to market with $400m of 8NC3s — settling at 9.25% and a price of 98.616. IPTs were in the 9.5% area, with around 1.5 points of OID.

Despite the tightening, the high yield manager still had issues with the company — years after the litigation financing specialist’s legal battle with US short-seller Muddy Waters.

“I wouldn’t touch it. To be honest, the fact that the company exists anymore surprises me.”

Rounding off the primary bond supply, Swedish electronic device supplier Foxway Group came to market for the first time with €200m of 5NC2 SS FRNs — these were priced at 3mE+700bps and a price of 100.

“There’s large support for existing issuers amongst investors. First time issuers have higher uncertainty”, said the sellsider.

Speaking on recent deals such as Infopro and Assemblin which were fuelled by sponsors carrying out fund-to-fund transfers, our sellsider said: “There’s been a few of these recently. I think it highlights an imbalance between buyer and seller expectations when it comes to valuations so there’s good value in holding vs what sponsors can achieve in the market”.

High Yield Secondary

“Spreads have completely tightened up. Some of the names trading around 70 in October are in the 80s or 90s now,” said an analyst at a special situations investment firm.

The analyst said: “Some of it is supply-driven (lack of issuance) but ultimately, there’s a lot of capital chasing a relatively limited set of opportunities”.

Within performing credit, French luxury goods company Isabel Marant saw its 8% 2028 SSNs record the biggest drop over the week, down 5 points to a price of 88. As you can see via our Transcript Tool, the company released disappointing Q1 numbers at the end of May (sales down 7% year-over-year). On the other hand, British online supermarket company Ocado saw its 2026s up six points to 81 as rumours swirl around a possible takeover bid from Amazon. 

Leveraged Loans Primary 

The KKR-owned Dutch food spreads company, Upfield launched a €3.89bn-equivalent TLB A&E split over three tranches (€2.375bn, $833m and £656m), looking to extend maturities to January 2028. KKR Capital Markets is sole physical bookrunner; commitments are due 6 July.

French identity technologies company Idemia upsized its €2.225bn-equivalent dual-tranche TLB due September 2028 (A&E from January 2026). 

Gambling group Entain came to market with a £500m-equivalent (increased from £400m) dual-tranche TLB (fungible add-on). The funds raised will refinance its £400m 2023 Ladbrokes notes, with the additional £100m for general corporate purposes.

The €230m TLB due 2028 landed at a margin of E+375bps and tightened to an OID of 99 (from IPTs of 97.5-98). The $385m TLB due 2029 landed at a margin of S+CSA+350bps and also tightened to an OID of 99 (from IPTs of 98-98.5).

One buysider said: “It’s a solid BB name that has a strong base of existing lenders. It’s where I’d put my money”.

That said, some buysiders rejected the deal outright on ESG grounds — given their own investors’ limits.

“Gambing isn’t compatible with our ESG requirements, regardless of the individual credit quality,” said another buysider.

On the loan deals this week, the sellsider said: “I think it’s a sign of a healthy, operating market. People pricing different risk levels; not everything coming in the same”.

At the time of writing, no results had been announced for EG Group’s monster A&E to address its 2025 and 2026 loan maturities. Commitments were due on Wednesday for the deal targeting €2.12bn, $2.79bn, £600m and A$378m of loans and seeking to push maturities to 2028.

Two investors said they expected docs changes to be announced, but sole physical bookrunner Barclays had no formal update.

Apollo’s cross-border financing for the acquisition of Univar seemed to be going well, with the euro loan tranche increased from €550m to €870m 2030 TLB. The margin landed at E+450bps and OID at 98, from IPTs of 97-97.5.

IT services group Inetum had a fungible add-on in market to clean up some of the remaining TLA left from the LBO financing last September. The company took out €343.4m of the €500m TLA piece in January, and launched a minimum €65m deal this week to tackle the rest. The deal seems to have gone well, with an increase to €155m at 97.5, the top end of talk, which should finally clear out the bank debt from the original transaction.

Leveraged Loans Secondary 

A CLO tranche portfolio manager said: “We’re still seeing a low level of loan creation which stems from the low level of M&A/LBO activity”.

On a relative value basis, the portfolio manager said they saw better opportunities in CLO liabilities rather than loans or bonds.

“BBs are volatile but ultimately we like the risk — particularly as an alternative to high yield credit”, they said.

German concrete manufacturer Xella saw its 4.25% 2028 TLBs down nearly two points after S&P downgraded it to B-due to increased leverage. 

The rating agency pointed to a “sharp drop in volumes due to rising interest rates, decreasing consumer confidence, and the challenging basis of comparison against the extraordinary 2021-2022”. In contrast, British beauty & wellness company The Hut Group saw its 4.5% 2026 TLBs rise three points to a price of 88. 

The company told investors that it expected “a significant increase in H1 2023 profitability” following a “strong Q2 2023, with a continued successful focus on profitability and cash generation”. Governance concerns also eased as founder and CEO Matthew Moulding gave up his golden share, which had entitled him to greater control over the business.

We also saw a BWIC (mostly EUR loans) totalling nearly €154m in the market. The largest tranches were each €6m, coming from Spanish chemical manufacturer Altadia (Euro Term Loan), Swiss specialty chemicals business Arxada (Euro Term Loan), Spanish sports company Dorna (Term B) and Dutch window covering company Hunter Douglas (Euro Term Loan). Bids were due Thursday 22 June. 9fin clients can read the full list here.

On The Move

We’re now adding people coverage to our weekly wrap — please send over any hires you think should be featured.

Stephen Smith has left his role as global co-head of leveraged finance syndicate at Barclays to become the head of capital markets at Sona Asset Management in London, according to LPC. Smith joined Barclays in 2017 from HSBC, where he had been part of the EMEA debt syndicate team since 2012. 

Mathew Cester has joined ICG as the global head of credit. Cestar was formerly co-head of investment banking and capital markets at Credit Suisse, and before that ran the leveraged finance business. Since 2020, he has been working for ION Group in roles including heading ION-sponsored SPAC vehicles. ICG’s current global head of credit fund management Zak Summerscale will be retiring at the end of this year.

Gilles Frisch has joined French firm Meeschaert Asset Management from Axion as head of high yield. Meeschaert has predominantly been focused on ESG and sustainable finance. Frisch will likely be taking on the current ESG high yield fund strategy.

Aegon Asset Management’s takeover of NIBC Credit Management and the North-Westerly CLO platform completed this week. Stuart Pirrie will be join Aegon as head of credit and European leveraged loans. He was previously the head of credit at NIBC.

As part of the ongoing Credit Suisse exodus, Siddhant Bhardwaj has joined Legal & General as an investment manager. Previously at Credit Suisse for eight years, he spent the last five years in CLO structuring.

Blackstone has hired Lorenzo Silvestri for its London office in CLO structuring and origination. He has been at Morgan Stanley since April 2021, most recently as vice president in CLO structuring. Before that he was at Goldman Sachs in a similar role since mid-2018, having joined from Natixis where he worked since 2015 in structured credit.

Forward Pipeline