The European high yield bond market reopened last week, with Verisure AB tapping the market for a EUR 200m deal. While not a large transaction, it does signal that the market is beginning to regain its footing after being closed for business in March and the first half of April amid the COVID-19 pandemic. The five-year senior secured floating rate notes for Verisure were upsized by EUR 50m and priced at Euribor+ 500bps with an OID of 99.5. The deal includes an unorthodox 102 first call price for a floating rate note, as reported.

Investors are now hoping that more issuers will tap the high yield bond market, as they have in the US which has seen a burst of issuance since reopening on 30 March, as borrowers have raised some much-needed funds, albeit at prices significantly higher than before the pandemic intensified.

Against a backdrop of central bank action and government stimulus to aid the global economy, combined with more stable equity markets, the yield on bonds in the secondary market have tightened in recent weeks, after spiking in March.

The yield on the ICE BofA Euro High Yield Index has tightened to 5.70%, down from its recent high of 8.1% on March 23. In the same time period, BB bond yields have tightened to 3.94% from 6.17%, with single-B’s falling to 8.63% from 12.23%. CCC-rated bonds are now yielding 15.3%. Despite the recent tightening, yields remain far above their late February levels of 1.56% for BB bonds and 3.63% for single-B’s.

Colm (C.J.) Doherty Global Head of Primary Market Analysis Debtwire

Colm Doherty is Debtwire’s Global Head of Primary Market Analysis. He is responsible for leading the production of primary market analysis and reports focused on the leveraged loan and high yield bond markets. Prior to joining Debtwire, Colm was Director of Analysis at Thomson Reuters LPC covering leveraged loans, CLOs and high yield bonds.

Colm has a B.A. in Economics & Legal Science from National University of Ireland Galway and an MSc. in Accounting & Finance from Ulster University.