European issuers push HY boundaries

Author: | Published: 24 Feb 2014

The further erosion of investor protections is set to define this year’s high-yield market. Here are the covenants giving issuers even greater flexibility

In an article published in IFLR last July, we reflected on the record volume of European high-yield issuances during the early part of 2013, and the issuer-friendly terms that were appearing as a result. This increase in activity continued throughout the year, and market expectations for 2014 are similarly positive. With issuance continuing at a pace, and the inclusion of more issuer-friendly terms showing no signs of abating, it's timely to consider the features that are defining this year's market.

The vast majority of features highlighted last July continue to appear in recent issuances. A few points, however, have developed further, and have given investors more to ponder. These changes merit further consideration and analysis.

Enhancements from 2013

Soft-capped exceptions

To recap, high-yield bonds typically contain...