Areva Bonds Lead Junk Decline as Euro Yields Hit Three-Year Highby
Areva SA’s bonds are leading a rout in Europe’s high-yield corporate debt market this year.
Notes of the French maker of atomic reactors have lost 14 percent, the most among the 50 biggest issuers of euro-denominated corporate junk bonds, according to Bank of America Merrill Lynch index data. The overall market has also tumbled, with the average yield for euro junk bonds rising to 6 percent on Thursday, a three-year high.
Areva was downgraded last month at Standard & Poor’s as the unprofitable company works to cover 7 billion euros ($7.6 billion) of spending and debt repayments by 2017. Investors have also been shedding risky assets worldwide amid market volatility in China and tumbling commodity prices.
“No one felt particularly good starting the year in high yield,” said Roman Gaiser, who oversees 3.5 billion euros of assets as the Geneva-based head of high yield at Pictet Asset Management SA. “China has been down and that’s made people nervous. On a stand-alone basis, Areva looks like a weak credit.”
Some investors have also been forced to sell Areva notes because of the S&P downgrade, Gaiser said. The one-grade cut to B+, or four steps below investment grade, meant that some funds could no longer hold the bonds.
A spokeswoman for Areva in Paris declined to comment on the company’s performance.