Moody's: October sees slight boost in EMEA high-yield bond issuance, but recovery remains weak

While high-yield bond issuance in Europe, Middle East and Africa was up $4.3 billion in October from September's low of 1.4 billion, driven mainly by repeat issuance, it does not signal a year-end rush, says Moody's Investors Service in the November edition of "High Yield Interest -- European Edition". In addition, rated leveraged loan volumes in October made up for the absence of loan issuance in September, outperforming bond issuance volume at $6.3 billion. 

"The recovery of high-yield issuance still remains muted, indicating that issuance volumes will likely end well below the record set in 2014, as there is less than two months left to go," says Peter Firth, a Moody's Associate Managing Director. "Furthermore, the reduction in 2015 volume is due partly to the significantly lower volume and number of first-time issuances this year." 

There were only 18 first-time bond issuers in the first 10 months of 2015, accounting for just $14.6 billion of issuance, compared with 52 first-time bond issuers in 2014 with $30.7 billion of issuance. In 2016, the main drivers of issuance will likely be the refinancing of upcoming debt maturities, modest GDP growth, combined with continued low interest and default rates, as well as the continuation of the banking disintermediation trend, albeit at a slower pace. 

M&A-driven rated debt will be modest and insufficient to boost volumes to the record level of 2014 because of competition that private equity sponsors face from cash-rich trade buyers and companies' increased focus on smaller bolt-on deals. Market enthusiasm is unlikely to rebound next year because of investors' increasing concerns about the fragile global economy and deteriorating credit quality in some sectors, such as the energy and metals and mining industries.