9fin's European High Yield Covenant Trends H1 23 Report
- Brian Dearing
- +Alice Holian
The leveraged finance markets aren’t exactly hot, but they are no longer stone cold, with volume up 30% in H1 2023 compared to H1 2022. By all appearances market participants have been willing to work with issuers to refinance existing debt, and even to let two do dividend recaps. Nonetheless, last year we heard murmuring that the buyside was going to start to pushing for better deal documentation following the raucous 2021.
We can definitively say the highly anticipated wave of covenant pushback, or (gasp) document tightening, has not fully materialised. Deals have gotten done on terms which are for the most part either consistent with recent history or more issuer friendly. Perhaps the trend toward looser documents that has carried the day for years is slowing, but there has certainly been no reversal.
Now that H1 2023 has finished, it’s time to take a look at what happened and to examine whether any of the trends we spotted in 2022 have carried on or if the year proved to be an anomaly. We start by exploring raw capacity to make dividends or incur debt, followed by an examination of key covenant features. Then we dive in to covenant pushback and a discussion of how refinancing transactions stacked up against the issuer’s prior deals. We close out this piece by highlighting transactions that you need to know about.
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(Note - this report is already available to 9fin clients)