Junk Bondholders Step Up Measures to Boost Protections in Europe

High-yield bond buyers in Europe are considering new measures to protect their investments after previous efforts floundered.

They may issue an annual statement of principles for the junk bond market, said Martin Reeves, head of global high yield at Legal & General Investment Management, which manages about 757 billion pounds ($1.07 trillion). The statement would accompany an open letter published last year by more than 20 asset managers including AllianceBernstein LP and Schroders Plc.

The letter “hasn’t got as much attention as investors would like,” said Reeves, who’s also co-vice chairman of the high-yield board at the Association for Financial Markets in Europe, the industry group that coordinated the effort. It hasn’t resulted in any improvements in covenant protection, according to 25 high-yield fund managers surveyed by independent credit research company DebtXplained in October.

Bondholders challenged shortening periods during which securities can’t be repaid last year and opposed the dilution of terms protecting them in a takeover, according to the document addressed to banks, law firms and advisers. They called for increased transparency, further disclosure and improved bond structures.

Europe’s junk bond market is reopening after the European Central Bank decided to include corporate notes in its asset-purchase program. The average yield investors demand to hold high-yield bonds in euros has fallen to the lowest since December from a more than three-year peak in January, Bank of America Merrill Lynch index data show.

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