Debt Purchasing Companies Feed Hungry Investors in European High Yield

Loan managers and alternative lenders tap bond market in record numbers .

Shrinking borrowing costs and a fast-consolidating industry have spurred a wave of high-yield bond sales from debt managers and non-bank lenders in Europe. That supply is being mopped up by investors willing to look at a new type of borrower as they struggle to boost returns amid record-low yields.

Non-bank financials have sold 3.6 billion euros-equivalent of bonds in Europe this year, more than double the 1.5 billion euros in the same period of 2015, data compiled by Bloomberg show. The issuers “are willing to embrace the high-yield market more and investors are becoming more comfortable existing alongside incumbent finance structures,” Paul Afeti, executive director in JPMorgan’s EMEA acquisition and leveraged finance team, said in an interview.

In the U.K. there have been a number of deals in 2016. Debt manager Lowell GFKL Group last month placed a 230 million-euro floating-rate bond after acquiring Tesch Inkasso, a German collections company. 

The sub-sector “has grown considerably through 2016,” Afeti said, and the pipeline for new deals in the U.K. and continental Europe “looks equally healthy." Companies are finding bonds an attractive funding alternative to loans because of liquidity in the market, an absence of maintenance covenants, no amortizations and a longer-term maturity that better matches assets and liabilities, he noted.

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