Leveraged Finance: Why Refinancing Bank Debt With Bonds In Europe Lowers Recovery Expectations Dec 11
Standard & Poors, December 2011
Abstract
European capital markets are increasingly financing speculative-grade companies, a trend that began in mid-2009 when bank financing dried up in the global financial crisis. Although recent volatility in the debt markets is temporarily preventing speculative-grade companies from accessing bond finance, Standard & Poor's Ratings Services believes the speculative-grade bond market in Europe will continue to provide liquidity for companies looking to refinance upcoming debt maturities and issue new debt. However, we note that post-default recovery prospects are lower on speculative-grade bonds than their equivalent loans, largely because certain structural features of bonds lead to lower recoveries compared to loans. Financial institutions are rethinking their commitment to lending to speculative-grade companies given that Basel III is introducing the need for banks...
Companies mentioned in this report are:
- Carmeuse Holding S.A.
- Ontex IV S.A.
- Odeon & UCI Cinemas Group Ltd.
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
- Carmeuse Holding S.A.
- Ontex IV S.A.
- Odeon & UCI Cinemas Group Ltd.
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