Moody's: Investors expect 2015 European high-yield bond volumes to meet last year's levels

Investors expect European high-yield bond issuance volumes in 2015 to match but not exceed 2014 levels, according to the results of a poll taken at Moody's Investors Service's recent 2015 High-Yield Conference in London. These expectations are in line with Moody's forecast for the sector in 2015. While refinancings remains an important driver of issuance volumes, activity generated by M&A transactions will probably gain importance as a volume driver in 2015.

"While the wave of LBO transaction seen in the past two years abated in the first few months of 2015, the outlook for the second half of the year appears more promising with a number of secondary LBO transactions underway," says Tobias Wagner, a Moody's Assistant Vice President -- Analyst and author of the report. "Ba- and high B-rated companies are likely to continue to drive issuance volumes. For newly-rated companies, transparency regarding the risks, operating track record and liquidity in secondary markets remain important for a successful completion of the bond issuance," adds Mr Wagner.

The lines between Baa3 and Ba1 are becoming blurred, as investors who have traditionally focused on investment grade are increasingly considering small exposures to Ba-rated companies in their search for yield. Companies on the cusp of investment grade with solid business profiles or a well-known credit story in the market continue to enjoy exceptional conditions. However, bond issuance at the single-B level, particularly for companies rated B3 and lower, remains very subdued with only a handful of deals since the beginning of the year. B-rated companies tend to have higher idiosyncratic risks, which often leads to greater yield differentiation across B-rated companies.

The report also comments that leveraged loan volumes remain below those of bonds so far this year, despite a number of refinancings and repricings in the loan market. Nevertheless, many established issuers and sponsors currently benefit from a wide range of financing options despite some market volatility.

Potential reasons for market volatility in 2015 continue to include any changes to the geopolitical and macroeconomic environment, as well as the evolution of interest rates. The impact of bank regulation is also an important topic for some market participants.