Our first report on 15 June sought to reveal the extent of stress and distress in European LevFin. We showed how 9fin’s bond and loan screeners can help funds and advisors locate opportunities and detect moves. Every two weeks we update our findings, focusing on new entrants, biggest movers, latest events and newsflow. This is our third report, our end-June 22 report is here.

With 754 bonds from 352 issuers trading at a price below 90 at Mid-July (down from 783 and 360 two weeks ago) it is clear that other metrics must be used to identify stress and distress. We believe spread to worst (STW) is a more appropriate measure, using over 800bps spread as stressed and over 1200bps spread as distressed.

But even on that basis, a significant number of EHY issues are trading at stressed and distressed levels. We now have 318 bonds from 199 issuers above 8% STW (up 16 and 11 from end June, and an increase of 151 and 83 from a month ago). Our total bond universe is 1,493 issuers from 553 borrowers, meaning that over one-in-five (21.3%) are at stressed/distressed levels.

NB our ‘Europe’ Region data includes issuance from reverse yankees. Data presented is from 15 July, and where figures have changed since then, our live pricing filters will update these searches.

HY bond stress doubles since Mid-June

Breaking this statistic further into stressed and distressed — we have 211 bonds as stressed from 138 issuers — unchanged and up five from a fortnight ago. But this is double the number from mid-June, and for further context we had just 49 stressed issuers in mid-March.

Recent entries into stressed include BMC Software, AEDAS Homes, Lutech, Stada, Coty, Consolidated Energy, Softbank, Modulaire and Birkenstock in euros and Jaguar Land Rover and Merlin Entertainments in dollars.

Eleven more bond borrowers enter into Distress

The number of bonds trading at distressed levels — at over 12% spread-to-worst — is now in three digits at 107, with another eleven borrowers having moved into distress (now 76) in the first half of July.

New entrants include TDC Group SUNs as ratings agencies caution on refi challenges for around €1.5bn of debt due next June. Retail names continue to be pressured, with Casino, Iceland (reporting this week) and Very Group on our list. Other notable entrants include McLaren, Hurtigruten, CGG (oil price falls), Arxada (Lonza Speciality Ingredients), Forgital, and EP Infrastructure (gas pipeline concerns).

Those on the fringes of distress are:

Two notable exits from our Distress list were Aston Martin as the supercar maker announced around half of the £653m fund raising would go to reducing its debt burden and Talk Talk after rumours of an offer from Vmed-O2 — note our legal analysis suggests the debt could qualify as portable.

Floaters - which ones are sinking?

In total we have 39 FRNs trading below 90 (stressed) — with new entrants into our list including Arrow, Italmach, Bormioli and TeamSystem.

Eight are trading below 80 (distressed), with new entrants including Pasubio and Wepa. Just one FRN rose by over two points in the past month — DOF, after it announced its restructuring plan.

In total six FRNs fell by more than five points in the past month — but in past week most names were stable.

Another 56 fell between two and five points last month — most notable names here included Cerved, Oriflame (earnings due this week), and SBB which remains under pressure to maintain IG status.

Last week the ELLI leveraged loan index dipped just under 90, below our 92 price indicator for stressed/distressed loans. In total we have 297 loans trading below this level out of 1,201 tranches (24.7%) that 9fin tracks in Europe.

Another 72 loans dropped below 92 in the first half of this month, including media names such as Ion Analytics, All3Media, and NielsenIQ.

In total, we have 224 loans tranches trading at between 85 and 92, our definition of stressed. This is one less tranche than at end-June.

We have 77 loan tranches indicated below 85, our definition of distressed, up from 74 at end-June. New entrants include Prosol, Rohm, and Xella — also among the largest price fallers, all dropping more than 10 points in the past month. Other big movers included names on our restructuring watchlist, GenesisCare, Cineworld, Holland & Barrett and Hurtigruten, with Vue and Hilding Anders on the slide after recently agreeing restructuring terms with their creditors.

In total 82 loans fell by more than five points in the past month, but of these names, only 18 were down by more than two points in the past week. This may point to signs of stabilisation at lower levels, but the largest rise of this group last week, was a mere 3/8-point for Keter.

Assessing the maturity wall

This week Schustermann & Borenstein showed the high price of deciding to wait to refinance, paying almost double the 5.5% we suggested it could print at a year ago.

Given the difficulty of getting deals away in the current market climate, just how big is the pack of deals that need to refinance in the next 18 months?

According to our screeners, we have 125 bonds from 92 issuers, with 24 from 22 in US dollars.

But 91 of the 125 bonds are trading at 97 or above, suggesting the market still has a high degree of confidence that these will be refinanced, despite difficult primary. But conversely, 18 bonds from 16 borrowers are priced at below 90, indicating that a refi for these could be challenging.

A number are already on 9fin’s restructuring watchlist — Takko, Lycra, Matalan, Adler RE, Corestate, Veon or as in the case of Petropalovsk, DOF, and Moby already in restructuring processes. Norican may be the one to explore further.

Note Nordex left this list after announcing a new loan to take out its 2023s last week.

For loans with maturities in next 18 months, we have 73 with just eight trading below 90.

For those priced at 90-95, on the cusp of refinanceability, we can add MSX International, Taghleef, Webhelp and Hurtigruten to our at risk list.

Movers and Shakers

So which bonds are on the move?

As mentioned above, price volatility has diminished of late, and just 11 bonds from 8 companies fell by more than 5% last week — most notably MHP, Fosun, Matalan and Diebold. In total, 66 bonds fell by over 2% in the past week, of which 42 (from 25 issuers) had fallen by more than 5% in the past month — the screenshot below shows those with moves over 10% in the last month.

The past week was evenly balanced in terms of movers, with 65 bonds from 39 issuers rising more than 2%. Not surprisingly Aston Martin and Talk Talk were amongst the best performers as well as Rubis Terminal which announced ESG loans to refi its 2025s. In total 12 instruments rose by over 5%

On a monthly basis 229 bonds from 132 borrowers were down more than 5%, with 50 (from 31) down more than 10%.

On the positive side, 26 bonds from 16 issuers rose by over 5% — but many of these were bombed out distressed names such as Aggregate and Orpea.