Tapping markets in other currencies, such as dollars, have helped banks chip away at difficult or large European deals this year, sellside sources told 9fin. But this avenue only appears open to large, well-heeled businesses, which are already well-known, or can easily gain the attention of CLO managers.

The first US-based buysider categorised potential European investment opportunities into two types of companies: ones with a legitimate business reason for issuing dollars, such as significant revenue in the US (examples would be Entain and Flutter); and businesses that are so large, they have to market to the US investor base to satisfy their financing needs (such as the European parts of the Altice and Liberty Global empires).

But high ratings of at least B1 make it much easier to gain the attention of the dollar buyer base.

“If they’re well-rated, some investors are seeing them as a great opportunity to buy a healthy credit for cheap,” said the second buysider. “BB issuers like Entain are getting good demand from the US because it’s just a good deal.”

Being listed also helps, like recent issuers Entain and Flutter, with the ease of access to company information allowing for smoother decision making. UK-based frozen foods business Nomad Foods recently issued a $700m TLB on 10 November and benefitted from a listing for this reason, according to the first buysider.

Finally, US investors are likely to focus on larger, more liquid deals. If an issuer is small and purely European, a lack of a broadly US buyer base could leave holders that do participate trapped.

This makes opportunities in America for smaller, lower-rated businesses slim. One banker from a Europe-focused levfin team said: “We’re not even exploring dollar tranches for a lot of our issuers. It doesn’t even come up in discussions for most of our deals.”

French telecoms services business ETC Group was an example of a European issuer tapping the US debt market in August this year, with a euro tranche added during execution to facilitate interest from investors. The cross-border deal was finalised with a $540m TLB at S+600 bps and a €475m TLB at E+625 bps, each with a 92 OID, reflecting ETC’s business profile, which covers both Europe and the US. Former unitranche lenders to the business Permira and Pemberton also participated in the syndication, as reported.

One small credit did pass through the cracks this autumn: a $200m TLB (B2/B) issued by Swedish pest control company Anticimex. The proceeds went to repay SEK 1,050m (~€97m) on its RCF, to general corporate purposes and to fund future acquisitions.

The investors buying up these deals are likely to be US CLO managers with a large European presence.

“CLOs are more likely to take a long term position and thus won’t need to worry about liquidity as much, and if you’re investing in a small European business, you’re going to want an analyst that understands the market,” said the first buysider.

It also helps for banks marketing European deals to have a deep network of US-based lenders and good knowledge of their holdings, they suggested. A buysider may be more likely to invest in, for example, a small European fund administrator if they already own several different credits in the sector.

The macro environment is also doing these companies no favours.

One market source focused on emerging markets said that US investors become more focused on US markets in times of economic uncertainty, to the detriment of overseas issuers wanting to borrow dollars.

Joe Zhao, a partner at Millennia Capital and a former member of the markets and policy team at the Federal Reserve, said: “The US markets are in a very volatile position with high inflation and an aggressive Fed tightening financial conditions, but the Fed does have full control over the direction of the market. In European financial markets, there are more moving pieces: the ECB versus Bank of England monetary policy, where the UK is a large part of the continent's economy; the conflicts in Eastern Europe is another wild card.”

“The US has its struggles right now, but Europe is worse,” was a common refrain when speaking to US investors.